Bill to clarify qualifying securities for public funds advances

A bill that would clarify the types of financial instruments authorized as securities for public funds under state law was given first-round approval Jan. 31.

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.

The bill specifies 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 would 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.

Gloor said dramatic changes in the banking industry as a result of recent federal reforms require changes in state law regarding securities for public funds.

Senators advanced the bill to select file on a 37-0 vote.