For decades, public entities invested operating funds almost exclusively with local banks. About 20 years ago, the picture began to change very slowly, almost imperceptibly. Public entities began investing some of their funds with other kinds of institutions for three reasons.

First, governments wanted the higher returns available from these other institutions to help them hold down taxes for state and local taxpayers, Second, they found that bank use of public funds often was dedicated to the maximization of the bank's return rather than to the benefit of the community. In essence, state and local governments discovered the concept of "float," and began to realize that they might do better elsewhere. Third, governments considered moving money out of local banks as "local" banks were fast becoming non-local as a result of mergers and acquisitions.

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