Vetoed Federal Reserve Exchange Listing Amendment Act

[ToadKing]

CONGRESS OF THE
COMMONWEALTH OF REDMONT
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A BILL TO

AMEND THE FEDERAL RESERVE ACT TO PERMIT EXCHANGE LISTING, INDEMNIFICATION, AND FIX SECTION NUMBERING

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The people of the Commonwealth of Redmont, through their elected Representatives in the Congress and the force of law ordained to that Congress by the people through the constitution, do hereby enact the following provisions into law:
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PART I — PRELIMINARIES​

1. Short Title and Enactment

(1) This Act may be cited as the 'Federal Reserve Exchange Listing Amendment Act.'

(2) This Act shall be enacted immediately upon its signage.

(3) This Act has been authored by Rep. ToadKing.

(4) This Act has been co-sponsored by Rep. IgnitedTnT.

(5) This Act amends the following acts:

(a) Federal Reserve Act

2. Reasons and Intent

(1) To correct the section numbering of the Federal Reserve Act, which contains a duplicate section number and a resulting numbering gap.

(2) To provide statutory authority for the FRB to list its financial instruments on a registered Stock Exchange.

(3) To permit the FRB to enter into listing agreements with registered Stock Exchanges and provide indemnification to those exchanges against losses arising solely from FRB default or non-payment on its instruments.

PART II — AMENDMENTS​

3. Amendments

(1) The section heading of the Federal Reserve Act, currently titled "2 - Rule Making Authority", shall be renumbered as follows:

"26 - Rule Making Authority"

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(2) The section heading of the Federal Reserve Act, currently titled "6 - Economic Powers", shall be renumbered as follows:

"67 - Economic Powers"

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(3) Section 7 of the Federal Reserve Act shall be amended by adding the following new subsections:

"(14) Exchange Listing Authority​

(a) The FRB may list any financial instrument it is authorised to issue, including but not limited to Treasury Bills, Treasury Bonds, and other securities, on any Stock Exchange registered with the Department of Commerce.​

(b) The FRB may enter into a listing agreement with a registered Stock Exchange governing the terms and conditions of such listing.​

(c) A listing agreement under this subsection shall be made publicly available in accordance with Section 8 of this Act.​

(15) Indemnification of Exchange Partners​

(a) The FRB may, by majority Board vote, agree to indemnify a registered Stock Exchange against losses arising directly and solely from the FRB's failure to make payment on a listed instrument at maturity or upon redemption.​

(b) Any indemnification agreed under this subsection shall:​

(i) Be limited in scope to losses directly caused by FRB non-payment and shall not extend to trading losses, market losses, or losses arising from the conduct of any third party;​

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(ii) Be approved by majority Board vote and recorded in a Board motion filed publicly in accordance with Section 8 of this Act; and​

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(iii) Not exceed the total face value of the instruments in respect of which the indemnification is given.​

(c) An indemnification under this subsection shall not be construed as a waiver of the FRB's sovereign or governmental status, nor shall it impose personal liability on any Board Member.​

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(d) Nothing in this subsection shall be construed as guaranteeing the profitability of any instrument listed on an exchange or as providing indemnification for any loss other than that arising from direct FRB non-payment."​

 

[End]

Nay - this will become an absolute mess

 

[ToadKing]

In the alternative view, the FRB requires a better system for listing and managing financial instruments and products available for investment. With this change we could likely see more private investment, with funds then being diverted back to DCGoverment for funding.

The Government needs money. In lieu of, as well as to supplement increases in taxes, this simple change should unlock more money for the Government.

 

[Darklander]

I believe this should be done whilst giving some teeth for enforcement for the DOC and FRB if done, abstain pending possible ideas for such

 

[Technofied]

Veto

The President withholds assent from this Bill, and it is hereby vetoed.

Reason: This Bill creates two new powers for the Federal Reserve Bank (FRB), beginning with the first is the ability to list any financial instrument.

The FRB would be able to list any financial instrument that it is capable of doing so with any Stock Exchange registered with the Department of Commerce, and for such listing to be made publicly available. I do not hold any concerns with this part of the Bill, however I hold several irreconcilable concerns with the second part of this Bill that I believe require scrutiny.


Proposed Subsection 14 under Section 7 allows the FRB to guarantee exchanges against its own default, and despite it being capped at face value and limited to non-payment, it creates a Government-backed liability. Should the FRB overextend itself on financial instruments and be unable to pay, the taxpayer is on the hook to make the exchange whole through Government funds. I cannot in good faith agree with this notion unless there are more statutory guardrails put in place to prevent such events from occurring.

Furthermore, in creating such Government liability a majority board vote is only required as opposed to a unanimous one. It is my view even the potential for a large Government liability alone should require congressional oversight and/or notification at the minimum.

Each indemnification (=compensation for harm or loss) is also proposed to be capped at the face value of the instrument, however there is no aggregate limit. While I have no reason to distrust the current FRB board, I cannot in good faith permit the possibility of indemnifying a large amount of financial instruments with no limit.

Finally, while the Federal Reserve Act does require disclosure of conflicts of interest, a Board Member still could have a financial interest in a stock exchange and vote to list instruments on it, then vote to indemnify that exchange. At the minimum, there should be a recusal requirement from voting, the lack of such requirement in my view exposes the Government to a serious breach of fiduciary duties which should not be accepted in any sense.

I recognise the intent of the proposed legislation by Representative ToadKing__, which is in addition to unlocking private investment, is to raise revenue. That said, I cannot support this Bill at this current time without oversight provisions that deal with limiting exposure and conflicts of interest.

Technofied