Last Friday, U.S. Senator Bob Menendez, Democrat of New jersey, introduced S. 3550, the Municipal Bonds Emergency Act. The bill aims to amend the Federal Reserve Act to permit the Board of Governors of the Federal Reserve System to engage in certain open market operations during unusual and exigent circumstances. The Federal Reserve’s authority would be extended to purchase bonds with any maturity period versus the current six month maturity period under Section 14 of the Federal Reserve Act.
Mr. Menendez’s rationale for the bill is to provide cities with another avenue of financing the rising costs of addressing the COVID-19. Mr Menendez’s argument for the bill may get an additional boost given that the U.S. Senate failed to advance a bill that is apparently blocking negotiations for a corona virus response bill that would provide between $1 trillion to $2 trillion in support, including financial aid for individuals, small businesses, and affected airlines, according to reporting by Reuters.
The bill holding up the process, HR 748, is a designed to repeal an excise tax on high-cost employer-sponsored insurance coverage. It appears that Republicans want to get the bill, which was introduced back in July 2019, out of the way before proceeding to a, now estimated, $2 trillion stimulus package that contains financial support for banks, hospitals, other health care providers, and individuals.
Until tomorrow, we stay in wait and see mode….