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First hearing held on Ohios public deposits bill
COLUMBUS, Ohio (2/8/10)--The first hearing on state legislation to allow Ohio credit unions to accept public funds was held Wednesday in the Ohio Statehouse, according to the Ohio Credit Union League.
Click to view larger image The first hearing on state legislation to allow Ohio credit unions to accept public funds was held Wednesday in the Ohio Statehouse, said the Ohio Credit Union League. Pictured are credit union people who attended the hearing and the two sponsors of House Bill 317 on Public Funds, Ohio State Reps. Peter Ujvagi (D-47)--front row, right, and Tracy Maxwell Heard (D-26)--front row, second from right. (Photo provided by the Ohio Credit Union League)
Ohio House Bill 317 would authorize credit unions to be eligible public depositories, make credit union loans eligible for certain economic assistance programs, and permit certain public investments to be made through credit unions. The bill was sponsored by Ohio State Reps. Tracy Maxwell Heard (D-26) and Peter Ujvagi (D-47), and presented before the House Committee on Financial Institutions, Real Estate & Securities. While this was the first hearing, there will be more with numerous witnesses both in favor of and in opposition to the bill. The league said it anticipates the hearings will be held on Wednesdays. Heard said the legislation would remove “unnecessary restrictive language” that currently prevents the use of credit unions as public depositories under Ohio's Uniform Depository Act. She reported that credit unions, under their respective credit union acts, are empowered to accept the funds and do accept public funds from federal public units. However, state public units are not permitted to deposit funds due to state banking restrictions. “As the numbers of traditional depositories continue to decrease, there is less choice by the public entities as to where they can deposit their funds, thereby making it increasingly difficult for local officials to find locally based entities with whom to do business,” Heard said. “This results in less competition, less choice, lower interest paid on deposits and higher rates on loans.” Ujvagi said Ohio credit unions have performed a critical financial role for decades in all communities and stepped up when redlining and disinvestments were widespread in certain communities. With the refusal of traditional banks to extend credit, credit unions again provided reasonable loans when “predatory lending and loan flipping attacked our communities from another direction,” he added. “Enabling local governmental institutions to utilize credit unions as eligible depositories simply recognizes the critical and appropriate role credit unions play in our communities, particularly at a time of increasing mergers and globalization of our banks and lending institutions,” Ujvagi said. Ujvagi told committee members those who oppose public depository choice for Ohio’s communities would raise the issue of banks and credit unions not having the same tax structure. Traditional banks have and will claim the differing tax structures somehow provide credit unions with an unfair advantage in the market, he added. If true, he questioned why then do credit unions have only .81% the total assets when compared to state-chartered financial institutions and hold only about a 6.7% share of total deposits in the state? Also, Ujvagi noted that--unlike banks--credit unions face certain operational restrictions, such as having the ability to raise outside capital.


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