Senate committee approves legislation to increase protection of public funds invested by local governments and schools
LANSING - The Senate Banking and Financial Institutions Committee today approved legislation that will provide greater protection for funds invested by local governments and schools, said Sen. Randy Richardville, chair of the committee.
“This legislation allows participating financial institutions in Michigan to network with other banks to insure public fund deposits in excess of the $100,000 insurance threshold,” said Richardville, R-Monroe. “It provides another method of safeguarding our local organizations’ investments in these uncertain economic times.”
Senate Bill 1517 and House Bill 6297 would permit local units of government and school districts to deposit public funds using the Certificate of Deposit Account Registry Service (CDARS) program offered by Promontory Interfinancial Network, a nationwide network of banks.
CDARS allows investors to deposit more than $100,000 at a participating bank and still be fully insured by the Federal Deposit Insurance Corporation (FDIC) up to $50 million. The service centralizes a customer’s account at the home bank, but issues deposits that are more than $100,000 through various banks.
Vicki Davis from the Monroe Bank and Trust testified in favor of the bills. Richardville said community banks support the measures because they will help keep funds at the local level.
“The CDARS program is a useful tool for local banks to trade blocks of investments with other banks, while still covering the entire investment with FDIC insurance,” said Richardville. “It helps the banks draw in public funds that can then be loaned to community members and businesses.”
State law currently prohibits local government and school districts from investing funds in non-Michigan financial institutions, which prevents participation in CDARS.
“Under this legislation, Michigan would join 42 other states across the country that are currently using the CDARS program to invest public dollars,” Richardville said.
The bills will now advance to the full Senate for consideration.
Editor’s note: A photograph of the Senate committee is available on the Senate Majority Photowire, located here.
Posted: Wednesday, September 24, 2008
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