Government Bailout Prevention Act
- Bill Number
- S. 4629
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 2
- Policy Area
- Economics and Public Finance
- Status
- Introduced
- Latest Action
- 2026-05-21: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- Last Updated
- 2026-07-06T18:44:37Z
AI-Generated Summary
Purpose This legislation aims to prevent the use of federal resources to assist state and local governments or school districts that default on their financial obligations or face default risks.
Key Provisions
- Prohibits federal funds from purchasing, guaranteeing, or providing lines of credit or grants to state, municipal, local, county governments, or school districts that have filed for bankruptcy, defaulted, or are at risk of defaulting on or after January 1, 2026.
- Bars the Secretary of the Treasury from using general fund revenues or borrowed funds to assist such entities.
- Prevents Federal Reserve banks from offering loans, guarantees, credits, or purchasing bonds for these governments or related entities.
- Includes debt restructuring in the prohibitions.
- Carves out an exception for federal assistance in response to a declared disaster.
- Excludes discretionary appropriations, direct spending, and standard federal grants from the restrictions.
- Defines "State" to include the 50 states, the District of Columbia, and U.S. territories.
Significant Changes to Existing Law The bill introduces new, explicit restrictions on federal financial support for defaulting or at-risk subnational governments, overriding other laws where they conflict. It does not alter definitions of discretionary spending or grants but adds targeted prohibitions on certain forms of assistance.
Potential Impacts
- Limits federal agencies such as the Treasury Department and Federal Reserve from intervening in state or local fiscal distress.
- May encourage state and local governments to manage debt more conservatively to avoid default risks.
- Could affect citizens in jurisdictions facing financial difficulties by reducing access to federal support during crises.
- Has minimal direct implications for international relations, as it focuses on domestic fiscal policy.
Main Stakeholders Affected
- State, municipal, local, and county governments.
- School districts.
- Federal agencies including the Department of the Treasury and Federal Reserve banks.
- Taxpayers and bondholders connected to these entities.
Notable Legal, Constitutional, or Political Implications The measure reinforces limits on federal spending authority in specific fiscal scenarios while preserving flexibility for disaster response and routine grants. It may intersect with principles of federalism by restricting national-level support for subnational debt issues.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (6)
Sen. Cotton, Tom [R-AR], Sen. Marshall, Roger [R-KS], Sen. Crapo, Mike [R-ID], Sen. Sheehy, Tim [R-MT], Sen. Cornyn, John [R-TX], Sen. Graham, Lindsey [R-SC]
Recent Actions
- 2026-05-21: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- 2026-05-21: Introduced in Senate
Bill Versions
- Government Bailout Prevention Act — issued 2026-05-21 — PDF (4 pages)