Bill would clarify qualifying securities for public funds

A bill heard Jan. 22 by the Banking, Commerce and Insurance Committee would clarify the types of financial instruments authorized as securities for public funds under state law.

Introduced by Grand Island Sen. Mike Gloor, LB155 would clarify that both mortgage-backed securities and collateralized mortgage obligations qualify to be pledged for purposes of securing public funds as mortgage-backed obligations.

Gloor said that public funds in excess of amounts insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) must be secured by “securities” as outlined in state law. Current law needs to clarify which financial instruments qualify as security for those funds, he said.

As introduced, LB155 would clarify that both mortgage-backed securities and collateralized mortgage obligations issued or backed by collateral 100 percent guaranteed by the Federal Home Loan Mortgage Corporation, Federal Farm Credit System, Federal Home Loan Bank or the Federal National Mortgage Association qualify as securities for purposes of satisfying the pledging for public funds requirements.

The bill also would allow the pledging for public funds requirements to be satisfied by letters of credit issued by any Federal Home Loan Bank and not just the Federal Home Loan Bank of Topeka.

Robert J. Hallstrom, representing the Nebraska Bankers Association, testified in support of LB155, saying it would update and clarify terminology related to qualifying securities for public funds and would expand the use of letters of credit.

Hallstrom said several banks that operate in Nebraska have moved their headquarters to other states. Under the bill, those banks would be able to use letters of credit issued by the Federal Home Loan Bank of whichever region they are headquartered in, he said.

No one testified in opposition to the bill and the committee took no immediate action on LB155.