House Passes Mayes' Plan to Allow Public Investment in Credit Unions
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The Michigan House of Representatives has passed a plan proposed by State Representative Jeff Mayes (D-Bay City) that will allow school districts and municipalities to invest in certificates of deposit with Michigan credit unions. The plan, which passed with overwhelming bipartisan support, will bring Michigan into line with other states.
"This plan really is a win-win for our residents and our credit unions," said Mayes, who has worked tirelessly to bring public and private interests together on a variety of issues. "By allowing our credit unions to get involved in these investments, they'll be able to compete with credit unions from other states, while giving schools and municipalities a way to diversify their investments and get more out of their money."
Under the terms of a law passed last year, Michigan school districts and municipalities have the ability to invest in certificates of deposit with banks that have a branch available in the state. However, these investments are only insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. In order to allow for investments more than $250,000 to be fully insured, banks instituted a registry program called the Certificate of Deposit Account Registry Service (CDARS) program. This program divides the initial investment between a number of member institutions so that no one institution has more than $250,000, allowing for all funds to be insured.
Credit unions are currently not allowed to take part in the CDARS program because their deposits are not insured by the FDIC, but instead up to $250,000 by the National Credit Union Association (NCUA). The plan that passed today will allow credit unions to participate in their own registry service or take part in CDARS, if allowed. This will allow schools and municipalities another avenue of investment, potentially with higher yields, while cutting administrative costs associated with banks.
"I'm very pleased that we saw support on both sides the aisle for this legislation," Mayes said. "I urge the Senate to move quickly to pass this common-sense plan that will bring money into cities across Michigan and help strengthen our credit unions."
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