BILL ANALYSIS �
AB 1617
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ASSEMBLY THIRD READING
AB 1617 (Dickinson)
As Amended April 23, 2012
Majority vote
BANKING & FINANCE 8-4 APPROPRIATIONS 12-5
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|Ayes:|Eng, Charles Calderon, |Ayes:|Fuentes, Blumenfield, |
| |Fuentes, Gatto, Roger | |Bradford, Charles |
| |Hern�ndez, Lara, Perea, | |Calderon, Campos, Davis, |
| |Torres | |Gatto, Ammiano, Hill, |
| | | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Achadjian, Fletcher, |Nays:|Harkey, Donnelly, |
| |Harkey, Morrell | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Provides that under certain circumstances, the
Treasurer shall invest at least 30% of moneys invested in the
time deposit program in community banks and credit unions.
Specifically, this bill :
1)Provides that the Treasurer, when choosing which community
banks and credit unions to use for investment, may take into
consideration the following:
a) The extent to which the institution serves a community
with an unemployment rate that exceeds the statewide
average;
b) Whether the institution services a low or moderate
income community;
c) Whether the institution offers small business loans in
the communities they serve;
d) Whether the institution is an "eligible bank" as defined
under current requirements regarding state investments;
and,
e) Whether the institution is headquartered in this state.
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2)Defines "community bank" as a bank or savings institution in
California with aggregate assets of less than $10 billion.
3)Requires the Treasurer to identify in public reports related
to the time deposit program recipients of deposits that are
community banks and credit unions.
EXISTING LAW :
1)Provides that eligible securities for the investment of state
surplus moneys include any of the following:
a) Bonds or interest-bearing notes or obligations of the
United States, or those for which the faith and credit of
the United States are pledged for the payment of principal
and interest;
b) Bonds or interest-bearing notes on obligations that are
guaranteed as to principal and interest by a federal agency
of the United States;
c) Bonds and notes of this state, or those for which the
faith and credit of this state are pledged for the payment
of principal and interest;
d) Bonds or warrants, including, but not limited to,
revenue warrants, of any county, city, metropolitan water
district, California water district, California water
storage district, irrigation district in the state,
municipal utility district, or school district of this
state;
e) Bonds, consolidated bonds, collateral trust debentures,
consolidated debentures, or other obligations issued by
federal land banks or federal intermediate credit banks
established under the Federal Farm Loan Act, as amended, in
debentures and consolidated debentures issued by the
Central Bank for Cooperatives and banks for cooperatives
established under the Farm Credit Act of 1933, as amended,
in bonds or debentures of the Federal Home Loan Bank Board
established under the Federal Home Loan Bank Act, in stock,
bonds, debentures and other obligations of the Federal
National Mortgage Association established under the
National Housing Act as amended, and in the bonds of any
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federal home loan bank established under that act,
obligations of the Federal Home Loan Mortgage Corporation,
in bonds, notes, and other obligations issued by the
Tennessee Valley Authority under the Tennessee Valley
Authority Act as amended, and bonds, notes, and other
obligations guaranteed by the Commodity Credit Corporation
for the export of California agricultural products under
the Commodity Credit Corporation Charter Act as amended;
f) Commercial paper of "prime" quality as defined by a
nationally recognized organization that rates these
securities;
g) Bills of exchange or time drafts drawn on and accepted
by a commercial bank, otherwise known as bankers
acceptances, which are eligible for purchase by the Federal
Reserve System;
h) Negotiable certificates of deposits issued by a
federally or state-chartered bank or savings and loan
association, a state-licensed branch of a foreign bank, or
a federally or state-chartered credit union;
i) The portion of bank loans and obligations guaranteed by
the United States Small Business Administration or the
United States Farmers Home Administration. Bank loans and
obligations guaranteed by the Export-Import Bank of the
United States;
j) Student loan notes insured under the Guaranteed Student
Loan Program established pursuant to the Higher Education
Act of 1965, as amended (20 United States Code (U.S.C.)
Section 1001 and following) and eligible for resale to the
Student Loan Marketing Association established pursuant to
Section 133 of the Education Amendments of 1972, as amended
(20 U.S.C. Section 1087-2); and,
aa) Obligations issued, assumed, or guaranteed by the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the International
Finance Corporation, or the Government Development Bank of
Puerto Rico; or, Bonds, debentures, and notes issued by
corporations organized and operating within the United
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States. Securities eligible for investment under this
subdivision shall be within the top three ratings of a
nationally recognized rating service. (Government Code
Section 16430. All further references are to the
Government Code).
2)For purposes of bank deposits by the Treasurer defines
"eligible bank" as a state or national bank located in this
state, selected by the Treasurer for the safekeeping of money
belonging to or in the custody of the state, that has received
an overall rating of not less than "satisfactory" in its most
recent evaluation by the appropriate federal financial
supervisory agency of the bank's record of meeting the credit
needs of the state's communities, including low- and
moderate-income neighborhoods, pursuant to Section 2906 of
Title 12 of the U.S.C. (Section 16500).
3)Allows the Treasurer with approval of the Director of Finance
to deposit money in banks outside the state when the banks are
fiscal agents of the state or custodians of securities owned
by the state. (Section 16501).
4)Allows the Treasurer to determine what amounts of money shall
be deposited in banks as time deposits and demand deposits.
(Section 16503).
5)Provides that deposits in any bank shall exceed the total of
its net worth. (Section 16505).
FISCAL EFFECT : According to the Assembly Appropriations
Committee, administrative costs of approximately $500,000 for
the Treasurer to administer the program.
COMMENTS :
Background . The Pooled Money Investment Account (PMIA),
governed by the Pooled Money Investment Board (PMIB) has three
primary sources of funds: State General Fund, special funds
held by state agencies, and moneys deposited by local
jurisdictions in the Local Agency Investment Fund (LAIF).
Moneys in the PMIA can only be invested in U.S. government
securities, securities of federally-sponsored agencies, domestic
corporate bonds, interest bearing time deposits in California
banks, savings and loan associations and credit unions,
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prime-rated commercial paper, repurchase and reverse repurchase
agreements, security loans, banker's acceptances, negotiable
certificates of deposit and loans to various bond funds.
Currently the Treasurer invests some moneys under the PMIA into
banks and credit unions via the time deposit program (TDP). The
TDP often provides a greater return than the yield from Treasury
bills and makes money available to banks at better rates than
they can get from other sources. Deposits in the TDP must be
collateralized by at least 110% of the funds on deposit.
The Pooled Money Investment Board Report (PMIBR) for February
2012 provides data on the various investments and cash
management strategies conducted by the Treasurer. Under the
existing TDP, for February 2012, $4,233,640,000 (Representing
6.53% of PMIA portfolio) was in time deposits in approximately
65 institutions located across the state. A review of the
institutions in the report reveals a broad range of small,
medium and large sized banks and credit unions that take part in
the TDP. However, a review of the report does not reveal which
banks would be considered community banks under the criteria in
this bill.
Previous Legislation . AB 1156 (Nava) of 2009 would have
prioritized the investment of surplus moneys in community banks
and credit unions. This bill was held in the Assembly
Appropriations Committee.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
FN: 0003854