The Albany Times Union recently published an Op-Ed I co-authored with New York State Assemblyman Harvey Weisenberg regarding municipal deposit reform legislation. Several states across the country are similarly pushing to eliminate outdated and counterproductive limits on which regulated and insured financial institutions they can choose to keep their public funds:
For nearly a hundred years, municipalities in New York have been prohibited from depositing taxpayer funds into credit unions, savings banks or savings and loans institutions based on an anachronistic law dating to a time before credit unions even existed.
Credit unions, which are federally regulated nonprofit cooperative financial institutions, offer rates of return that are competitive with -- and may be higher than -- commercial banks. Credit unions and savings banks often provide low-income communities with access to loans that can help them start a business, purchase a home or meet other financial goals.
Local governments are now fighting for autonomy and asking the state to pass a law that lifts this prohibition. Changing the law would provide municipalities and school districts with greater freedom to decide where best to deposit taxpayer dollars -- taking into account the safety of funds, pricing and other taxpayer benefits. Arbitrarily restricting deposits based on a century-old law means limiting competition and reducing options.
Municipalities and school districts throughout New York have to make difficult fiscal choices this year.
Amending this law will allow them to make the most of their dollars by allowing them to consider investing in banking institutions that offer better rates of return or greater community impact.
As a New York City commissioner working across industries to protect city businesses and residents, and as an assemblyman who introduced municipal deposit reform legislation, we are working together to achieve this needed change.
In New York City, Mayor Michael Bloomberg has a plan to make $25 million in deposits available to savings banks and credit unions located in low- and moderate-income communities once the state Legislature passes municipal deposit reform. Reforming our municipal deposit law is a no-cost strategy that will help credit unions and savings banks make loans to new and growing small businesses, homeowners and other community residents.
Elected officials across the state, and across every level of local government, actively support municipal deposit reform as a pragmatic, potentially cost-saving measure that won't cost the state a dime.
Savings banks and credit unions are equally safe, equally insured and equally regulated as commercial banks, making the old law impossible to justify.
It is time to end the anticompetitive restrictions limiting local governments from depositing their funds in institutions that provide the greatest benefits to their residents.
Jonathan Mintz is the commissioner of the New York City Department of Consumer Affairs. Harvey Weisenberg, D-Long Beach, is the Assembly's assistant speaker pro tempore.
First published in print: Thursday, April 15, 2010