Public Banking Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8721 To provide for the Federal charter of certain public banks, and for other purposes. IN THE HOUSE OF REPRESENTATIVES OCTOBER 30, 2020 Ms. TLAIB (for herself, Ms. OCASIO-CORTEZ, Ms. PRESSLEY, Ms. JAYAPAL, Ms. OMAR, Mr. GREEN of Texas, Mr. THOMPSON of Mississippi, Mr. BLUMENAUER, Ms. LEE of California, and Ms. SCHAKOWSKY) introduced the following bill; which was referred to the Committee on Financial Serv- ices, and in addition to the Committee on Oversight and Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the com- mittee concerned A BILL To provide for the Federal charter of certain public banks, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Public Banking Act of 2020’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 8721 IH Sec. 1. Short title; table of contents. Sec. 2. Definitions. TITLE I—FEDERAL RECOGNITION OF PUBLIC BANKS Sec. 101. Federal charter of public lending banks and public payment banks. Sec. 102. Federal recognition of non-federally chartered banks. Sec. 103. Federal Reserve System membership. Sec. 104. Public member bank services. Sec. 105. Specific requirements relating to covered banks. Sec. 106. Regulations. Sec. 107. Technical assistance. TITLE II—FEDERAL RECOGNITION OF PUBLIC SECURITIES Sec. 201. Regulation of public lending banks and non-federally chartered banks. TITLE III—PUBLIC DEPOSIT INSURANCE Sec. 301. In general. TITLE IV—POSTAL BANKING Sec. 401. Partnerships with covered banks for postal banking services. TITLE V—PUBLIC BANK DEVELOPMENT PROGRAMS Sec. 501. Public bank grant program. Sec. 502. Public bank incubator program. Sec. 503. Community development grant program. Sec. 504. Treatment of funding. SEC. 2. DEFINITIONS. 1 In this Act: 2 (1) BOARD OF GOVERNORS.—The term ‘‘Board 3 of Governors’’ means the Board of Governors of the 4 Federal Reserve System. 5 (2) COMMISSION.—The term ‘‘Commission’’ 6 means the Securities and Exchange Commission. 7 (3) CORPORATION.—The term ‘‘Corporation’’ 8 means the Federal Deposit Insurance Corporation. 9 (4) COVERED BANK.—The term ‘‘covered bank’’ 10 means— 11 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 8721 IH (A) a public lending bank (as defined in 1 section 101(b)); 2 (B) a public payment bank (as defined in 3 section 101(c)); and 4 (C) a non-federally chartered bank (as de- 5 fined in section 102(b)) that obtains a certifi- 6 cate of Federal recognition under section 102. 7 (5) PUBLIC MEMBER BANK.—The term ‘‘public 8 member bank’’ means a covered bank that is a mem- 9 ber of the Federal Reserve System. 10 (6) SECRETARY.—The term ‘‘Secretary’’ means 11 the Secretary of the Treasury. 12 (7) STATE.—The term ‘‘State’’ means each of 13 the several States, the District of Columbia, and any 14 commonwealth, territory, or possession of the United 15 States. 16 TITLE I—FEDERAL RECOGNI- 17 TION OF PUBLIC BANKS 18 SEC. 101. FEDERAL CHARTER OF PUBLIC LENDING BANKS 19 AND PUBLIC PAYMENT BANKS. 20 (a) IN GENERAL.—The Board of Governors shall 21 charter public lending banks and public payment banks. 22 (b) PUBLIC LENDING BANK DEFINED.—The term 23 ‘‘public lending bank’’ means a person that— 24 (1) is wholly owned and controlled by— 25 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 8721 IH (A) a State or Tribal government, includ- 1 ing a unit of local government, government 2 agency; 3 (B) a State or Tribally chartered corpora- 4 tion; 5 (C) a nonprofit instrumentality designated 6 by a State or Tribal government as acting in 7 the public interest of a community within such 8 State or Tribe, including an unincorporated 9 community; or 10 (D) an association of 1 or more entities de- 11 scribed in subparagraphs (A) through (C); 12 (2) that— 13 (A) is not owned or governed by, operated 14 as a subsidiary of, or otherwise affiliated with 15 any for-profit entity; 16 (B) does not own, govern, or operate as a 17 subsidiary of any for-profit entity; and 18 (C) does not compensate any employee, ex- 19 ecutive, or board member at a rate to exceed 20 the salary of the President of the United States 21 for that equivalent period; and 22 (3) provides— 23 (A) fiscal agent services; 24 (B) money transmitter services; 25 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 8721 IH (C) digital dollar services as a pass- 1 through intermediary for the Federal Govern- 2 ment; 3 (D) depository services; 4 (E) postal banking services; 5 (F) securities-related services; or 6 (G) any lending product approved by the 7 Board of Governors. 8 (c) PUBLIC PAYMENT BANK DEFINED.—The term 9 ‘‘public payment bank’’ means a person that— 10 (1) is wholly owned and controlled by an entity 11 described in subsection (b)(1); 12 (2) provides at least one of the services speci- 13 fied in subparagraphs (A) through (E) of subsection 14 (b)(2); and 15 (3) does not provide the services specified in 16 subparagraph (F) or (G) of subsection (b)(2). 17 (d) EXCEPTION OF CERTAIN PUBLIC LENDING 18 BANKS FROM CONSIDERATION AS BANK HOLDING COM- 19 PANY.—A person described in subsection (b) shall not be 20 considered a bank holding company under the Bank Hold- 21 ing Company Act of 1956 (12 U.S.C. 1841 et seq.) or 22 any other law, solely due to the person’s ownership or con- 23 trol of a public lending bank, public payment bank, or non- 24 federally chartered bank. 25 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 8721 IH (e) GUIDANCE WITH RESPECT TO EXCLUDED AND 1 MARGINALIZED GROUPS.—The Board of Governors shall 2 issue guidance to public lending banks and public payment 3 banks to ensure that the services provided by such banks 4 are universal and comprehensively include historically ex- 5 cluded and marginalized groups. 6 SEC. 102. FEDERAL RECOGNITION OF NON-FEDERALLY 7 CHARTERED BANKS. 8 (a) CERTIFICATES OF RECOGNITION.—The Board of 9 Governors shall issue certificates of Federal recognition to 10 non-federally chartered banks. 11 (b) NON-FEDERALLY CHARTERED BANK DE- 12 FINED.—The term ‘‘non-federally chartered bank’’ means 13 a person that is— 14 (1) wholly owned and controlled by an entity 15 described in section 101(b)(1); and 16 (2) either— 17 (A) chartered as a non-depository institu- 18 tion by an approved non-Federal financial regu- 19 lator described in subsection (c); or 20 (B) insured as a depository institution by 21 the Corporation, or under an alternate public 22 deposit insurance scheme approved by the Cor- 23 poration. 24 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 8721 IH (c) LIST OF APPROVED NON-FEDERAL FINANCIAL 1 REGULATORS.—The Board of Governors shall establish 2 and maintain on a public website of the Board of Gov- 3 ernors a list of approved non-Federal financial regulators 4 for the purpose of determining eligibility for a certificate 5 of Federal recognition under this section. 6 (d) CONVERSION.—At the request of a non-federally 7 chartered bank, the Board of Governors may convert such 8 bank into a public payment bank or a public lending bank. 9 (e) SERVICES.—A non-federally chartered bank— 10 (1) may not offer depository services before— 11 (A) obtaining— 12 (i) deposit insurance or conditional 13 deposit insurance from the Corporation; or 14 (ii) deposit insurance from alternate 15 public deposit insurance scheme approved 16 by the Corporation; and 17 (B) becoming a public member bank or a 18 conditional public member in accordance with 19 section 103(b); and 20 (2) may— 21 (A) invest any funds held on behalf of an 22 entity described in section 101(b)(1) in a fiscal 23 agent account; 24 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 8721 IH (B) provide fiscal agent services, including 1 sending and receiving money and effectuating 2 payments to and from any entity whose funds 3 are invested in a fiscal agent account; 4 (C) invest any funds held on behalf of an 5 entity not described in section 101(b)(1) in a 6 payments account or as digital dollar products; 7 and 8 (D) provide money transmitter and digital 9 dollar services. 10 (f) GUIDANCE WITH RESPECT TO EXCLUDED AND 11 MARGINALIZED GROUPS.—Not later than 1 year after the 12 date of the enactment of this Act, the Board of Governors 13 shall issue guidance to non-federally chartered banks to 14 ensure that the services provided by such banks are uni- 15 versal and comprehensively include historically excluded 16 and marginalized groups. 17 SEC. 103. FEDERAL RESERVE SYSTEM MEMBERSHIP. 18 (a) ELIGIBILITY.—A covered bank shall be eligible 19 for membership in the Federal Reserve System as a public 20 member bank and, except as provided in subsection (c), 21 shall be treated in the same manner as a member bank 22 under section 4 of the Federal Reserve Act (12 U.S.C. 23 308). 24 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 8721 IH (b) CONDITIONAL PUBLIC MEMBER BANK.—The 1 Board of Governors shall establish a special category of 2 public member bank, called a ‘‘conditional public member 3 bank’’, for persons that are in the process of applying for 4 becoming a covered bank. Such conditional public member 5 banks shall be subject to such conditions and restrictions 6 as the Board of Governors determines to be necessary and 7 appropriate to promote public welfare, provided that such 8 conditions and restrictions are not arbitrary, punitive, or 9 unduly burdensome. 10 (c) PURCHASING STOCK.—The Board of Governors 11 may not require a covered bank to purchase stock in a 12 Federal Reserve Bank or otherwise maintain paid-in cap- 13 ital in the Federal Reserve System. 14 SEC. 104. PUBLIC MEMBER BANK SERVICES. 15 (a) PURPOSES OF SERVICES.—The Board of Gov- 16 ernors shall offer the services described in subsection (b) 17 to public member banks in order to— 18 (1) promote the safety, soundness, viability, and 19 resiliency of publicly owned and operated financial 20 institutions; 21 (2) facilitate the provision of payments, credit, 22 and other financial services as a public good; and 23 (3) support the financial and budgetary health 24 of State and Tribal governments, local government 25 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 8721 IH units, government agencies, State or tribally char- 1 tered corporations, nonprofit entities designated by a 2 State or Tribal government to be acting in the pub- 3 lic interest of a community within such State or 4 Tribe, or an association of one or more of such enti- 5 ties. 6 (b) SERVICES.—The Board of Governors shall offer 7 the following services to public member banks: 8 (1) Fiscal agent accounts— 9 (A) in which public member banks may in- 10 vest funds held on behalf of any entity de- 11 scribed in section 101(b)(1); and 12 (B) under which— 13 (i) the Board of Governors shall pay 14 interest on all balances held overnight in 15 such fiscal agent accounts at a rate that is 16 greater than or equal to the greater of— 17 (I) the sum of the overnight pol- 18 icy target rate plus two percent; or 19 (II) the daily rate on 30-year 20 marketable Treasury bonds; and 21 (ii) the interest described in clause (i) 22 (minus a reasonable administrative fee im- 23 posed by the public member bank) shall be 24 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 8721 IH paid to the entity for which the public 1 member bank invested such funds. 2 (2) Payment accounts— 3 (A) in which public member banks may in- 4 vest funds held on behalf of any entity other 5 than an entity described in section 101(b)(1) 6 for purposes of providing money transmitter 7 services; and 8 (B) under which the Board of Governors 9 shall pay interest (minus a reasonable adminis- 10 trative fee) on all balances held overnight in 11 such fiscal agent accounts at a rate that is 12 greater than or equal to the greater of the fol- 13 lowing: 14 (i) The overnight rate paid on re- 15 quired reserves. 16 (ii) The overnight night paid on ex- 17 cess reserves. 18 (3)(A) Digital dollar services in which public 19 member banks may operate as pass-through inter- 20 mediaries for any digital dollar or other financial 21 services offered by the Federal Government, includ- 22 ing— 23 VerDate Sep 11 2014 02:07 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8721.IH H8721 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 8721 IH (i) digital dollar account wallets ad- 1 ministered by the Board of Governors 2 (commonly known as ‘‘FedAccounts’’); 3 (ii) digital dollar cash wallets adminis- 4 tered by the Secretary (commonly known 5 as ‘‘eCash’’); and 6 (iii) postal banking services provided 7 by the United States Postal Service. 8 (B) The Board of Governors may issue regula- 9 tions as necessary to ensure effective harmonization 10 and coordination between covered banks and any en- 11 tities responsible for administering digital dollar 12 services on behalf of the Federal Government. 13 (4)(A) A facility (to be known as the ‘‘Public 14 Bank Primary Liquidity Facility’’) to provide liquid- 15 ity to public member banks by buying or lending (at 16 a reasonable rate of interest that is not greater than 17 the overnight policy target rate) against federally 18 recognized public loans (as described in section 105) 19 and federally-recognized public securities (as de- 20 scribed in section 201(b)), under terms and condi- 21 tions that the Board of Governors determines to be 22 necessary and appropriate to promote publi [Text truncated for display. 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