BWM C.S.H.B. 3065 75(R)BILL ANALYSIS


FINANCIAL INSTITUTIONS
C.S.H.B. 3065
By: King
4-8-97
Committee Report (Substituted)


BACKGROUND 

The Linked Deposit Program is an "interest buy-down" program between the
borrower and the lending institution, with absolutely no liability
attached to the state.  As local banks choose to participate in the
program and lineup borrowers, state investment funds managed by the
Comptroller's office are deposited in local banks at a reduced rate of
interest for the amount of the loan made.  With this deposit, the lender
is able to offer a borrower a lower interest rate on agriculture-related
loans.  Borrowers through the Linked Deposit Program must be in the
business or entering the business of processing and marketing agricultural
crops in Texas; producing alternative agricultural crops; producing crops
where production has markedly declined due to a natural disaster; or using
water conservation equipment for agricultural purposes. 

Acts of the 74th Legislature changed the membership structure of the Texas
Agricultural Finance Authority (TAFA) by requiring four of the nine
members to be "persons who are knowledgeable about agricultural lending
practices."  The Governor satisfied this requirement by appointing four
individuals who are either employed by or associated with banks that are
located in rural areas or are routinely familiar with agricultural lending
practices.  Under the current law, a bank that employs a TAFA appointee,
could be shut out from participating in the Linked Deposit Program. Given
the rural nature and location of the banks that participate in the
program, this restriction could not only limit a bank's lending practices
but also virtually prohibit otherwise eligible borrowers in the region
served by the bank from having access to the low-interest loans offered by
the Linked Deposit Program. 

TAFA board's only function in the loan program is to recommend to the
Comptroller acceptance or rejection of a Linked Deposit loan application.
The TAFA board does not set eligibility standards nor make any
discretionary decisions on the loans.  As with any conventional loan, the
local lending institution decides on the borrower's eligibility.  The
Linked Deposit transaction is between the Comptroller and the lending
bank.  TAFA has no pecuniary interest in the Linked Deposit Program.   

PURPOSE

To enable banks and lending institutions statewide to continue to
participate in the Linked Deposit Program, even if they have an officer,
director or employee who has been appointed to serve as a board member of
the Texas Agricultural Finance Authority. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency or
institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 44.07, Agriculture Code, by adding subsection
(k) which provides that a lending institution is not ineligible to
participate in the linked deposit program solely because a member of the
board is also an officer, director or employee of the lending institution. 

 SECTION 2.  Emergency Clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The Committee Substitute to HB 3065 merely adds subsection (k) to Section
44.007, Agriculture Code, rather than amending subsection (c).  The change
made is the same as in the original bill.