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Rule filed under Banking, The Public Good

Depositing Public Funds in Local Banks

| Written by ILSR Admin | No Comments | Updated on Mar 29, 2010 The content that follows was originally published on the Institute for Local Self-Reliance website at

A growing number of states and cities are considering or enacting policies that move government bank accounts to small community banks and credit unions.

These bills have two primary motivations:

  • To withdraw public funds from big banks that have imposed high fees on customers and engaged in predatory mortgage lending, redlining, and other practices that destroy community wealth.
  • To channel public funds to the small banks and credit unions that are the primary source for small business loans and other productive local investments, which in turn create jobs and generate tax revenue.

Model State Legislation Outline Developed by SEIU

Large institutions, like universities and hospitals, can also move their funds:

Guidance on harnessing university deposits for community investment


Depositing Public Funds in Local Banks – New Mexico (Proposed)

The bill would give New Mexico-based banks and credit unions that otherwise meet the state’s banking requirements a 10 percent preference in bidding to be the state’s fiscal agent, the institution that manages its day-to-day banking business.  The bill also requires the New Mexico Treasurer and the State Investment Council to develop an investment policy for funds held in CDs (certificates of deposit) that would increase community bank lending to local residents and businesses. Continue reading

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