H.R. 9324: Government Bailout Prevention Act

This bill would bar the federal government from stepping in to financially support state and local governments or school districts that run into serious debt trouble after January 1, 2026. In plain terms, it would make it harder for the federal government to rescue a state, city, county, or school district if that entity:

• files for bankruptcy,
• defaults on its debt, or
• is considered likely to default without federal help.

What would be prohibited

The bill says federal funds could not be used to:

• buy or guarantee the obligations of an affected state or local government,
• give it lines of credit,
• provide direct or indirect grants or aid for paying its obligations, or
• use Treasury funds or borrowed federal money to purchase, guarantee, or otherwise support its debt.

It also says Federal Reserve banks could not provide loans, loan guarantees, credits, or other financial instruments to these governments or buy their bonds as a way of assisting them.

What is still allowed

The bill would not apply to federal assistance given in response to a declared disaster. It also says the ban would not cover ordinary federal discretionary appropriations, direct spending, or regular federal grants that are not specifically aimed at helping an entity pay its debts.

Scope

The bill applies to state governments, the District of Columbia, U.S. territories and possessions, and local entities such as cities, counties, municipalities, and school districts. It also covers other entities with taxing authority or bonding authority when they are seeking this kind of financial assistance.

Additional effect

The bill says the prohibition includes debt restructuring or related rescue activity, which means it is intended to block not just direct bailouts but also similar federal measures that would reduce or manage the entity’s debt burden.

Relevant Companies

None found