Report Title:

Certificate of Deposit Account; Network Sharing FDIC Insurance

Description:

Authorizes the use of certificates of deposit that use a network of financial institutions to share FDIC-insured deposits in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository, to secure public funds. (SB2529 HD1)

THE SENATE

S.B. NO.

2529

TWENTY-SECOND LEGISLATURE, 2004

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to securities for the protection of public funds.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Section 36-21, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The director of finance may invest any moneys of the State which in the director's judgment are in excess of the amounts necessary for meeting the immediate requirements of the State and where in the director's judgment the action will not impede or hamper the necessary financial operations of the State in:

(1) Any bonds or interest-bearing notes or obligations:

(A) Of the State (including state director of finance's warrant notes issued pursuant to chapter 40);

(B) Of the United States;

(C) For which the faith and credit of the United States are pledged for the payment of principal and interest;

(2) Federal Farm Credit System notes and bonds;

(3) Federal Agricultural Mortgage Corporation notes and bonds;

(4) Federal Home Loan Bank notes and bonds;

(5) Federal Home Loan Mortgage Corporation bonds;

(6) Federal National Mortgage Association notes and bonds;

(7) Student Loan Marketing Association notes and bonds;

(8) Tennessee Valley Authority notes and bonds;

(9) Securities of a mutual fund whose portfolio is limited to bonds or securities issued or guaranteed by the United States or an agency thereof or repurchase agreements fully collateralized by any such bonds or securities;

(10) Securities of a money market mutual fund that is rated AAA, or its equivalent, by a nationally recognized rating agency or whose portfolio consists of securities that are rated as first tier securities by a nationally recognized statistical rating organization as provided in 17 Code of Federal Regulations section 270.2a-7;

(11) Federally insured savings accounts;

(12) Time certificates of deposit;

(13) Certificates of deposit open account;

(14) Certificates of deposit that use a network of financial institutions to share deposits insured by the Federal Deposit Insurance Corporation in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository;

[(14)] (15) Repurchase agreements with federally insured banks, savings and loan associations, and financial services loan companies;

[(15)] (16) Student loan resource securities, including:

(A) Student loan auction rate securities;

(B) Student loan asset-backed notes;

(C) Student loan program revenue notes and bonds; and

(D) Securities issued pursuant to Rule 144A of the Securities Act of 1933, including any private placement issues;

issued with either bond insurance or overcollateralization guaranteed by the United States Department of Education; provided all insurers maintain a triple-A rating by Standard & Poor's, Moody's, Duff & Phelps, Fitch, or any other major national securities rating agency;

[(16)] (17) Commercial paper with an A1/P1 or equivalent rating by any national securities rating service; and

[(17)] (18) Bankers' acceptances with an A1/P1 or equivalent rating by any national securities rating service;

provided that the investments are due to mature not more than five years from the date of investment. Income derived from those investments shall be a realization of the general fund; provided that income earned from moneys invested by the general funds, special funds, bond funds, and trust and agency funds on an investment pool basis shall be paid into and credited to the respective funds based on the contribution of moneys into the investment pool by each fund. As used in this section, "investment pool" means the aggregate of state treasury moneys that are maintained in the custody of the director of finance for investment and reinvestment without regard to fund designation."

SECTION 2. Section 38-3, Hawaii Revised Statutes, is amended to read as follows:

"§38-3 Securities for protection of funds deposited. For the protection of funds deposited by the director under this chapter, the following securities shall be deposited with the director, or with banks in the continental United States, or with financial institutions with trust powers authorized to do business in the State, as the director may select, to be held therein for safekeeping subject to the order of the director, any other provisions of the laws of the State to the contrary notwithstanding:

(1) Bonds, notes, debentures, or other evidences of indebtedness of the State or of any county of the State, for which the payment of the interest and principal is a direct obligation of the State or the county, as the case may be, in an amount at least equal in their par value to the amount of the deposit with the depository;

(2) Bonds, notes, debentures, or other evidences of indebtedness of agencies of the State or of agencies of any county of the State, for which the payment of the interest and principal is from the revenues of the issuing agency, in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository;

(3) Bonds, notes, debentures, or other evidences of indebtedness of any improvement district or frontage improvement of any county of the State, for which the payment of the interest and principal is from the assessments made for the improvement, in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository;

(4) Bonds, notes, bills, or certificates of indebtedness of the United States or of agencies of the United States, for which the payment of the interest and principal is a direct obligation of the United States, in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository;

(5) Bonds, notes, federal home loan bank letters of credit, or debentures of agencies of the United States, in an amount at least equal to ninety-five per cent of their market value, but not to exceed their par value, to the amount of the deposit with the depository;

(6) Warrants or warrant notes of the State in an amount at least equal in their face value to the amount of the deposit with the depository;

(7) Bonds, notes, debentures, or other evidences of indebtedness of any other state of the United States, for which the payment of the interest and principal is a direct obligation of that state, in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository;

(8) Bonds, notes, debentures, or other evidences of indebtedness of any city or of any county in the continental United States, for which the payment of the interest and principal is a direct obligation of the city or county, as the case may be, in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository; [or]

(9) Certificates of deposit that use a network of financial institutions to share deposits insured by the Federal Deposit Insurance Corporation in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository; or

[(9)] (10) Other assets on the books of the depository that are eligible to secure advances from the Federal Reserve Banks under regulations of the Federal Reserve Board, in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository; provided that not more than fifty per cent of the deposits held by a depository may be secured by assets of this class.

Security shall not be required for that portion of any deposit that is insured under any law of the United States.

Securities deposited under this section may be withdrawn from time to time; provided that the required amount of securities shall at all times be kept on deposit. The director at any time may require additional securities to be deposited under this section.

In the event that the depository shall fail to pay the deposits, or any part thereof, upon presentation of a check or a certificate of deposit, then the director shall forthwith convert the securities deposited under this section into money for and on behalf of the State; provided that no securities shall be sold except at public auction, after giving at least ten days' public notice thereof in the State."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.