Until two months ago, Arkansas thrifts had no reason to care about proposals suggesting the Federal Deposit Insurance Corp. raise the coverage level for municipal deposits.
That is because the state's thrifts were not allowed to accept them.
But now Arkansas' 11 thrifts might want to keep a closer eye on the municipal deposit bills pending in Congress. In April, the Legislature passed a measure to let thrifts take government deposits, beginning in August.
Stanley Bailey, chairman of $1.6 billion-asset Superior Federal Bank in Little Rock, said the state's thrifts have been lobbying for legislation for 20 years, to no avail. "Because of dumb luck or whatever, we were able to introduce the bill this year with no opposition," he said.
Though state-by-state data are hard to come by, bankers in Arkansas and officials at America's Community Bankers said they believe Arkansas was the last state to bar thrifts from accepting government deposits.
Recognizing that the law might be a deterrent to thrifts considering entering Arkansas, the Legislature passed the bill unanimously, said Larry Brandt, president of First Federal Savings Bank in Harrison, Ark.
Bank executives said the ban had been in place since 1935, when a law was passed requiring that municipalities only bank with FDIC-insured institutions. Until 1989, thrifts were insured by the Federal Savings and Loan Insurance Corp., not the FDIC.
Both Superior and First Federal expect to see an increase in deposits, especially in areas where theirs are the only depository institutions. Mr. Bailey added that the new law should also clear up confusion among municipalities, many of which did not know the ban existed. "In a number of cases, a local government would open up an account, and we had to ask them to remove the deposits," he said.