HBA-MPM H.B. 2957 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2957
By: King, Phil
Pensions & Investments
4/5/2001
Introduced



BACKGROUND AND PURPOSE 

State law determines if a federal home loan bank (FHLB) letter of credit
can serve as collateral for a municipal fund depository.  Currently, the
Public Funds Investment Act provides an indirect reference to FHLB letters
of credit by providing that obligations of United States agencies and
instrumentalities are authorized investments that may serve as collateral
for the deposit of public funds.  However, since letters of credit are not
specifically mentioned, some municipalities are wary of relying on FHLB
letters of credit to serve as collateral for their deposit funds.  House
Bill 2957 clarifies that letters of credit may be used as security for a
deposit of public funds. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 2957 amends the Government Code to provide that letters of
credit by governmental entities constitute an authorized investment for
purposes of providing security for a deposit of public funds.  

EFFECTIVE DATE

September 1, 2001.