On March 1st the Austin City Council voted unanimously to investigate what it will take to move its money from Bank of America to a local bank/credit union. When the vote was finally taken at 10:45 pm after testimony from half a dozen Austinites including several from Occupy Austin, the room erupted in cheers. This move by the city is a response to activism by Occupy Austin and its Bank Action Committee which brought the egregious and criminal conduct of too-big-to-fail banks like Bank of America as well as the city’s relationship with BOA to the public via move-your-money marches and petition drives.
As it was sparsely reported by a couple of news outlets (KUT Radio and YNN) the council tasked the City Manager to study how to accomplish the move and to report back in sixty days. So on May 1st we should have some idea of how the city will proceed. In order to accomplish this move, the City of Austin and its future financial institution will have to navigate a jumble of state and federal rules and regulations
Here are some of the statutory issues Austin and its prospective credit union will have to work with:
The Texas Finance Code notes that credit unions can accept municipal funds. But the National Credit Union Administration rules and regulations place a limit on the amount of money a credit union can automatically take in from public entities:
(b) Limitations. (1) Unless a greater amount has been approved by the Regional Director, the maximum amount of all public unit and nonmember shares shall not, at any given time, exceed 20% of the total shares of the federal credit union or $1.5 million, whichever is greater.
Any credit union responding to a Request for Proposal from the City of Austin will need to submit a plan as stipulated in section 701.32 of the NCUA rules and regulations (part of Title 12 of the Code of Federal Regulations).
The Texas Government Code lists the type of institutions that can accept public securities, and credit unions are not specifically mentioned, though the state Comptroller can designate institutions as “custodians” as explained in section (iii) below:
Instead of depositing pledged securities with the comptroller, a depository may deposit them with a custodian. The custodian may be the (i) Texas Treasury Safekeeping Trust Company, (ii) a state or national bank that has a capital stock and permanent surplus of not less than $5 million, is a state depository, and has been designated as a custodian by the comptroller, or (iii) a financial institution authorized to exercise fiduciary powers that has a capital stock and permanent surplus of not less than $5 million, has its main office, branch office, or a trust office in this state, and has been designated as a custodian by the comptroller. For purposes of this subsection, “financial institution” has the meaning assigned by Section 201.101(1), Finance Code. The comptroller may designate those custodial applicants that are acceptable and may reject those whose management or condition, in the opinion of the comptroller, do not warrant the placing of securities pledged by state depositories.
There are obviously some hoops to jump through in order for the Austin to move its money out of Bank of America and into a credit union, but judging from the response I got from an official at my credit union at the idea of doing business with the City of Austin, the interest is definitely there, and the obstacles are not insurmountable.
Please take action and let your local credit union/banking institution know how important it is to you that the city sever its financial relationship with Bank of America and request that they help facilitate the city’s divestment from a too-big-to-fail bank to a responsible local option.