Sens. Bob Menendez, D-N.J., and David Perdue, R-Ga., on March 20 introduced the Municipal Bonds Emergency Relief Act (MBERA), which would allow the Federal Reserve to buy municipal debt to help local and state governments finance the delivery of key public services due to the COVID-19 pandemic.
The senators hope to see the bill included as part of the third coronavirus response bill that is being debated in the Senate and will soon be considered by the House.
The American Public Power Association is strongly encouraging its member utilities to reach out to their representative and senators in support of including the text of this bill in the coronavirus response legislation.
The bill would allow the Federal Reserve to address the unprecedented and quickly worsening dislocation under way in the $3.8 trillion municipal bond market. Over the past week, borrowing costs for municipalities have skyrocketed, making it more difficult to finance the coronavirus response.
The bill would permit Federal Reserve banks to directly purchase municipal bonds. The MBERA would amend Section 14(b) of the Federal Reserve Act to allow the Federal Reserve to buy municipal bonds under unusual and exigent circumstances.
“States and localities are on the front lines in the fight against COVID-19 and need assistance from the federal government to be able to finance the increasing costs of the response to this health emergency,” said Menendez.
“The Municipal Bonds Emergency Relief Act would do that by allowing the Federal Reserve to provide support to state and local governments for this crisis and similar future emergencies,” he said.
The bill is supported by national organizations including the American Securities Association, the Government Finance Officers Association, the Financial Markets Association, the National Association of State Treasurers and the National League of Cities.