Home Issues Should Municipal Bonds be Considered High Quality Assets to Encourage Investment?

Should Municipal Bonds be Considered High Quality Assets to Encourage Investment?

by webs Cybernetics
0 comment

What is it?

This bill would direct federal banking agencies to treat any municipal bond that is liquid, readily marketable, and investment grade as of the calculation date as a high-quality level 2A liquid asset. It seeks to mitigate the impact of a regulation that could prevent financial institutions from investing in municipal bonds, which would negatively impact funding for community infrastructure projects.

The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, and the Comptroller of the Currency are directed to amend an existing liquidity risk measurement rule to comply with this legislation.

Municipal bonds can be issued by states, counties, or municipalities such as cities and towns to finance government spending. They are exempt from federal taxes for investors, and often from state and local taxes as well.


Municipal governments that offer bonds to fund community projects, financial institutions, the FDIC, the Federal Reserve Board of Governors, and the Comptroller of the Currency.


The CBO estimates that implementing this bill could affect direct spending and revenues, but that the net effects would be negligible for each year.

More Information

In-Depth: Sponsoring Rep. Luke Messer (R-IN) introduced this bill to prevent the federal government’s liquidity risk measurement rule from having a negative impact on the ability of municipalities to fund vital projects and programs:

“A lot of times it seems like bank regulations have very little impact on our day-to-day lives. But, that’s just not the case here. This arbitrary decision by Federal regulators could have a real-world impact on cash-strapped school districts and local governments by raising the cost of critical infrastructure projects. We shouldn’t allow Federal bureaucrats to promote policies that disincentivize investment in our local communities.”

This bill was passed by the House Financial Services Committee on a vote of 56-1 and currently has 28 cosponsors in the House, divided equally between Democrats and Republicans.
Of Note: In 2011, the total value of municipal bonds issued in the U.S. was estimated to be $3.7 trillion in tradeable securities.

You may also like

%d bloggers like this: