On September 18, Senate Energy and
Natural Resources Committee Chairman Jeff Bingaman (D-NM) introduced
legislation to ease tax laws restricting the ability of banks to purchase municipal
bonds to help small municipalities raise cash for their infrastructure
projects. Under current tax law, banks
are prohibited from purchasing bonds from municipalities that issue more than
$10 million in debt per year in municipal bonds.
"Municipalities have been innocent
bystanders to Wall Street's troubled financial state, which is making it
difficult for them to affordably borrow for such important projects as building
roads, schools, and hospitals. By
allowing banks to play a greater role in the bond market, more capital will be
available to municipalities, particularly small and rural ones, at lower
interest rates," Bingaman said.
Bingaman's Municipal Bond Market Support Act (S. 3518) would raise the limit
to $30 million and would create a "safe harbor" that enables banks to
invest up to two percent of their assets in municipal debt.