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Administration junks bill to deposit govt funds only in FDIC banks
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Posted on Mar 03 2009
The administration disapproved a bill requiring all government funds to be deposited only in banks that are insured by a federal agency like or by a U.S. Treasury listed surety firm, saying it would likely result in fewer investments and less jobs.
On Friday, acting Gov. Timothy P. Villagomez said while he commends the Legislature for its concern for the safety of government funds deposited into non-Federal Deposit Insurance Corp.-insured financial institutions, House Bill 16-4 presents a few notable concerns.
H.B. 16-4 or the CNMI Government and Public Deposit Safety Act of 2008, introduced by Rep. Joseph P. Deleon Guerrero, requires government funds to be deposited in institutions whose deposits of less than $100,000 are insured by an agency of the U.S. government or by a U.S. Treasury listed surety agency.
Villagomez said the bill would prevent the CNMI government from using reasonably safe and liquid money market funds that are not insured by the FDIC.
“Money market funds generally offer higher returns than bank deposits and the value of money market shares have historically never fell below the $1 per share industry standard,” Villagomez said in his message to Speaker Arnold I. Palacios and Senate Pres. Pete P. Reyes.
He added that despite the bill’s good intentions and transition period, “its restrictive policy may substantially reduce our local banks’ willingness to invest in our local economy.”
Villagomez said at a time when banks in the United States are failing and the U.S. government is carrying out a massive bailout of many large U.S. banks, the CNMI banking industry remains stable and largely unaffected by the turmoil in the U.S. financial markets.
He said by requiring 100 percent collateral in U.S. Treasury bills for government deposits, the amount of available funds for prudent private lending in the local economy may be significantly curtailed and may well result in a credit or liquidity crisis for the CNMI economy.
“This would likely result in less investment and less job creation for our local economy, at a critical juncture in our economic development…For these reasons, I am returning H.B. 16-4…to your offices, disapproved,” Villagomez said.
