Payments for losses of public deposits in failed or failing financial institutions. (FE)

What it would have done

Summary by the Legislative Reference Bureau, the Legislature's nonpartisan drafting office. It's their wording, not ours.

Under current law, the Investment Board (SWIB) on behalf of the state, the county board on behalf of a county, the common council on behalf of city, the village or town board on behalf of a village or town, and the governing board of certain other local governmental units (collectively, public depositor) must designate one or more federal or state credit unions, federal or state savings and loan associations, state banks, savings and trust companies, federal or state savings banks, or national banks in this state (financial institutions) for deposit of all public moneys received by the public depositor. The Depository Selection Board must establish procedures for the selection of financial institutions receiving public deposits from state agencies. An appropriation to the Department of Financial Institutions (DFI) provides funds to repay public depositors for losses resulting from a failed or failing financial institution's failure to repay the deposit of public moneys. DFI administers the claims process against the moneys in this appropriation. The maximum payment that DFI can make to a public depositor for losses from a single financial institution is $400,000, not including any federal deposit insurance also paid to the public depositor. These loss payment provisions also apply to local government deposits in the local government pooled-investment fund managed by SWIB. Although the appropriation to DFI to pay public deposit losses to public depositors is a sum sufficient appropriation, there is a limit to the amount that may be expended from the appropriation. This limit is calculated based on the balance of the state deposit fund on June 30, 1955, plus interest accruing on that balance. Beginning on August 1, 1985, interest on the balance is calculated at a rate of 5 percent per year.

Also under current law, a financial institution that originates a residential mortgage loan on or after January 1, 1994, and that requires and maintains an escrow account for the borrower to assure the payment of property taxes or insurance by the borrower, must pay interest on the escrow account at the variable interest rate. This escrow account interest rate, which is calculated by DFI, is the average of the interest rates paid by financial institutions on regular passbook deposit accounts and is published annually by the Legislative Reference Bureau (LRB).

Who's behind it

14 lawmakers are its authors⁠. 11 are Republicans and 3 are Democrats.

5 more lawmakers signed on in support⁠.

What it would cost

State agencies filed a cost estimate. Each opens as a PDF from the Legislature.

• Fiscal Estimate From DFI
• Fiscal Estimate From TREAS