State treasurer says banks have more money to loan

State Treasurer Ted Wheeler announced  a major increase in the public funds that are available to lend to Oregon families and small businesses, which could inject more than $600 million into the state’s economy.

In addition, the move – which allows financial institutions to provide more loans in their communities – won’t cost taxpayers any extra money.

“We are helping to unlock Oregon’s lending power, and putting more of Oregon’s public fund deposits to work for Oregon families and businesses,” Treasurer Wheeler said. “Sparking more business financing will be a catalyst to help Oregon’s economy recover and grow.”

One of the frequently cited reasons for Oregon’s slow economic recovery has been a shortage of bank fin
ancing.
The State Treasury protects public fund deposits in Oregon by requiring financial institutions to post collateral for those funds, which ensures that public deposits can be recovered in the event of a bank failure.

The move this week reduces from 100 percent to 75 percent the level of collateral that most Oregon banks need to post, which will then make more of the money available to lend. As a whole, the financial industry has grown more stable since the market meltdown of 2008.

There is an estimated $2.75 billion currently pledged as collateral for public fund deposits in Oregon, according to State Treasury statistics, so a reduction in that requirement by 25 percent will make more than $600 million immediately available to lend.

The reduction in collateral requirements is one way that Treasurer Wheeler is attempting to put Oregon’s public fund deposits to work helping Oregonians. The Treasury places as much as $200 million from the state’s Short Term Fund in banks doing business in Oregon, through the Time Certificate of Deposit program.

Wheeler also is asking the federal government to raise the threshold of Federal Deposit Insurance Corporation protection for public fund deposits, which would allow more lending using Oregon public funds. He also is proposing that the Legislature create new tools to improve access to financing, through a new state banking function.   
The level of collateral that’s required for banking institutions that accept public fund deposits is based on their financial health, as monitored by the State Treasury, the Oregon Department of Business Services and the FDIC. Banks are required to report quarterly to the State Treasury any public funds balances that exceed the current federal insurance threshold.

The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. The office also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices.

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