What does Preamble of Government Bailout Prevention Act do?

This bill aims to prohibit the provision of Federal funds to State and local governments and school districts for payment of obligations. It also seeks to prevent Federal Reserve banks, the Department of the Treasury, and other Federal agencies from financially assisting entities that have defaulted on their obligations.

What does SHORT TITLE. of Government Bailout Prevention Act do?

This bill is formally titled the Government Bailout Prevention Act

What does DEFINITION. of Government Bailout Prevention Act do?

This section defines the term 'State' as used within this Act. The definition includes any of the several States. The definition also encompasses the District of Columbia. Furthermore, the definition extends to any territory or possession of the United States.

What does PROHIBITION ON THE USE OF FEDERAL FUNDS TO PAY OR GUARANTEE of Government Bailout Prevention Act do?

This section prohibits the use of federal funds to purchase or guarantee obligations of state, municipal, local, county, or school district governments facing financial distress. The prohibition applies to governments that have filed for bankruptcy, defaulted on obligations, are at risk of defaulting, or are likely to default, starting January 1, 2026. The Secretary of the Treasury is restricted from using general fund revenues or borrowed funds to assist financially distressed government entities. Federal Reserve banks are also prohibited from providing financial assistance, including purchasing bonds, to such entities. These restrictions do not apply to federal assistance provided in response to a declared disaster.

What does APPLICABILITY. of Government Bailout Prevention Act do?

This section clarifies the applicability of the prohibition outlined in section 3. The prohibition includes debt restructuring and related activities. The prohibition does not include discretionary appropriations or direct spending as defined in the Balanced Budget and Emergency Deficit Control Act of 1985. The prohibition also does not include grants awarded by the United States to various governmental entities (state, municipal, local, county, or school district).

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Government Bailout Prevention Act

Last updated: 5/21/2026 · Introduced: 5/21/2026

Author: Todd Young (R-IN)

TL;DR (AI)

This bill prohibits the federal government from using funds to purchase or guarantee obligations of financially distressed state and local governments, including those at risk of default, starting January 1, 2026.
The bill restricts the Treasury and Federal Reserve from providing financial assistance to governments facing financial distress, with exceptions for disaster relief.
This legislation excludes discretionary appropriations, direct spending, and grants awarded to governmental entities from the prohibition on federal financial assistance.

119th Congressin committeeOfficial page

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Other Sections

Includes provisions on preamble, short title., and 3 more.

5 sections

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