Texas House Bill HB2103

Texas 2011 - 82nd Regular

• Out of House Committee: 5/4/11
• Introduced: 3/3/11
• Voted on by House: 5/12/11
• Refer: 3/8/11
• Out of Senate Committee: 5/18/11
• Report Pass: 4/20/11
• Voted on by Senate: 5/24/11
• Engrossed: 5/12/11
• Governor Action: 6/17/11
• Refer: 5/12/11
• Enrolled: 5/24/11
• Passed: 6/17/11

Caption

Relating to the consideration of a letter of credit issued by a federal home loan bank as an eligible security for collateral to secure public funds.

Impact

The passage of HB 2103 is expected to have a notable impact on state financial policies by officially recognizing letters of credit from federal home loan banks as eligible collateral. This could encourage greater participation from local governments in utilizing such financial instruments, potentially leading to improved funding opportunities for public projects. Furthermore, this change might facilitate better risk management strategies for public entities, as letters of credit often come with established credit ratings and reliability associated with federal backing.

Summary

House Bill 2103 aims to revise the definition of 'eligible security' in the context of securing public funds by including letters of credit issued by federal home loan banks. This amendment is intended to expand the range of securities that local governments and public entities can use as collateral when dealing with public funds, thereby enhancing financial flexibility. The specific inclusion of letters of credit aligns with broader efforts to modernize and adapt public fund management mechanisms while providing stability in financial transactions.

Contention

While the bill received support for enhancing liquidity and flexibility, it faced scrutiny regarding the implications of accepting letters of credit as collateral. Critics expressed concerns that this could open avenues for greater risk if the financial health of the federal home loan banks were to deteriorate. Additionally, some stakeholders argued that the shift might divert attention from more conventional forms of secure collateral historically used in public finance, raising questions about the overall safety and prudence of these financial adjustments.