September 8, 2016, Introduced by Reps. Howrylak, Lucido and Somerville and referred to the Committee on Financial Services.
A bill to establish the community bank of Michigan; to provide
for its operation, regulation, and supervision; to prescribe the
powers and duties of the community bank of Michigan; and to
prescribe the powers and duties of certain state agencies and
officials.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "bank
of Michigan act".
Sec. 3. As used in this act:
(a) "Advisory board" means the advisory board of directors
described in section 7.
(b) "Bank" means the community bank of Michigan established in
section 5.
(c) "Department" means department of insurance and financial
services.
(d) "Director" means the director of the department or his or
her designee.
(e) "Surplus funds" means that term as defined in section 2a
of 1855 PA 105, MCL 21.142a.
Sec. 5. (1) The community bank of Michigan is established. The
director shall operate, manage, and control the bank, shall
establish the bank's principal place of business in this state,
shall establish and operate any other places of business for the
bank that the director determines are appropriate, and shall make
and enforce orders, rules, regulations, and bylaws for the
transaction of the bank's business.
(2) Subject to the limitations and restrictions contained in
this act, and in addition to any specific powers established in
this act, the bank shall engage in the business of banking and may
engage in any business or financial transactions in which any
banking institution or bank holding company may engage.
(3) The director shall promulgate any rules he or she
considers necessary to implement this act, to establish the powers
of the director under this act, and to establish the powers and
functions of the bank.
(4) The director shall promulgate any rules required or
permitted under this act under the administrative procedures act of
1969, 1969 PA 306, MCL 24.201 to 24.328.
Sec. 7. (1) The governor shall appoint an advisory board of
directors to the bank, consisting of 7 members. The governor shall
appoint at least 2 individuals to the advisory board who are
officers of other banks, the majority of the stock of which is
owned by residents of this state, and at least 1 member who is an
officer of a state-chartered or federally chartered financial
institution.
(2) The governor shall appoint a chair, vice chair, and
secretary for the advisory board described in subsection (1) from
among the members of the advisory board. The term of office of a
member of the advisory board is 4 years.
(3) The advisory board shall do all of the following:
(a) Meet regularly with the management of the bank to review
the bank's operations to determine whether recommendations should
be made by the board to the director relating to improved
management performance, better customer service, and overall
improvement in internal methods, procedures, and operating policies
of the bank.
(b) Make recommendations to the department relating to the
establishment of additional objectives for the operation of the
bank.
(c) Make recommendations to the department concerning the
appointment of officers of the bank.
(d) Meet regularly with the director to present any
recommendations concerning the bank.
(e) If authorized by the director, act on behalf of the bank
with respect to the powers and functions of the bank.
(f) Perform any other duties assigned by the director.
Sec. 9. (1) The director shall appoint a president of the bank
and may appoint and employ any subordinate bank officers,
employees, or agents he or she considers appropriate to improve the
operation of the bank and advance the interests of the state. The
director shall define the duties, designate the titles, and fix the
compensation of any individual appointed by the director under this
subsection.
(2) The director may designate the president or another
officer or employee of the bank as his or her agent with respect to
the functions of the bank, subject to his or her supervision,
limitation, and control.
(3) In any state fiscal year, the sum of the total amount of
compensation paid to the officers, employees, or agents of the bank
appointed under subsection (1), and any other expenditures for the
operation and maintenance of the bank, shall not exceed the
appropriations, revenues, or capital lawfully available for those
purposes.
(4) The director, or the president if authorized by the
director, may remove and discharge any officer, employee, or agent
of the bank if the director considers that removal appropriate to
improve the operation of the bank and advance the interests of the
state.
Sec. 11. (1) Unless otherwise provided by law, the state
treasurer shall deposit all surplus funds in the bank. The bank
must credit all income earned on surplus funds that are deposited
in or invested with the bank to the revenue and income of the bank.
(2) The state treasurer is exempt from any liability for the
loss of any surplus funds deposited in the bank under this section.
(3) All deposits in the bank are guaranteed by the state. All
deposits in the bank are exempt from state taxes, except as
provided by law, and from taxation by any county, village,
township, or city.
(4) If any financial institutions make the bank their reserve
depository, the bank may perform the functions and render the
services of a clearinghouse for those institutions, including, but
not limited to, providing domestic and foreign exchange.
Sec. 13. The bank may do any of the following:
(a) Make, purchase, guarantee, or hold loans that are any of
the following:
(i) Made to a state-chartered or federally chartered lending
agency or institution or any other financial institution.
(ii) Made to a holder of bank certificates of deposit and
savings accounts, if the amount of the loan does not exceed 90% of
the value of the certificates and savings accounts offered as
security.
(iii) Made to a farmer who is a resident of this state, if the
loan is secured by a recorded mortgage that gives the bank a first
lien on real property located in this state and the amount of the
loan does not exceed 80% of the value of that property.
(iv) Insured or guaranteed in whole or in part by the United
States or its agencies or instrumentalities.
(v) Eligible for guarantee by the state. A loan made under
this subparagraph may provide that any interest that remains unpaid
at the end of any period specified in the loan is added to the
principal amount of the debt and accumulates interest after it is
added to the principal of the debt.
(vi) Made to an individual or bank holding company for the
purpose of purchasing or refinancing the purchase of the stock of a
bank located in the state.
(vii) Made to a nonprofit organization that is exempt from
federal taxation under section 501(c)(3) of the internal revenue
code of 1986, 26 USC 501(c)(3), if the proceeds of the loan are to
be used for construction, reconstruction, repair, renovation,
maintenance, and associated costs on park or recreational property
under the control of the department of natural resources.
(viii) Made under 7 USC 1932 to a nonprofit corporation for
the purpose of relending loan funds to rural businesses.
(ix) Made to finance businesses and development projects in
rural areas under 7 CFR part 1948, subpart B; 7 CFR part 1951,
subpart F or R; or 7 CFR part 1955, subpart A, B, or C.
(x) Obtained as security pledged for or originated in the
restructuring of any other loan properly originated or participated
in by the bank.
(xi) Made to an instrumentality of this state.
(xii) Otherwise authorized in this act or another state law.
(xiii) Made to an investment company created to complete a
trust preferred securities transaction for the benefit of a
financial institution located in this state.
(b) If the bank is participating in the loan and the bank
determines that it is in the best interests of the bank to do so,
purchase the remaining portion of a loan from a participating
lender that is closed by regulatory action or from the receiver of
the participating lender's assets.
(c) Make agricultural real estate loans in order to
participate in the agricultural mortgage secondary market program
described in 12 USC 2279aa to 2279aa-14.
(d) Purchase participation interests in loans made or held by
banks, bank holding companies, state-chartered or federally
chartered lending agencies or institutions, any other financial
institutions, or any other entity that provides financial services
and that meets underwriting standards that are generally accepted
by state or federal financial regulatory agencies.
(e) Invest its funds in any investments authorized under state
law or authorized by the director by rule.
(f) Lend or finance hospitals or medical facilities that are
established and operated by a government, government sponsored
entity or authority, or a similar entity, established under the
laws of this state; or a subdivision of any government or entity
established under the laws of this state.
(g) Buy and sell federal funds.
(h) Lease, assign, sell, exchange, transfer, convey, grant,
pledge, or mortgage any real and personal property to which it has
acquired title.
(i) Acquire real or personal property or property rights by
purchase or lease and construct, remodel, and repair buildings on
real property acquired under this subdivision.
(j) Receive deposits from any source and deposit its funds in
any bank or other financial institution.
(k) Take any other action that is necessary, convenient,
advisable, or desirable to carry out the powers expressly granted
or necessarily implied in this act, through or by an act of its
president, officers, agents, or employees or by contract with any
person.
(l) Purchase mortgage loans on residential real property
originated by financial institutions.
Sec. 15. (1) If at any time in a state fiscal year the balance
in the state general fund is insufficient to meet legislative
appropriations, the state treasurer and the director of the
department of technology, management, and budget may execute and
issue notes or other evidences of indebtedness on the state general
fund. The principal amount of all outstanding evidences of
indebtedness issued under this subsection may not exceed
$10,000,000.00 at any time. The term of any evidence of
indebtedness issued under this subsection shall not exceed 12
months.
(2) The state may not issue evidences of indebtedness under
subsection (1) unless the state treasurer first requests and
obtains a statement from the director of the department of
technology, management, and budget and the state budget director
certifying that anticipated general fund revenues for the balance
of the state fiscal year in which the evidences of indebtedness are
to be issued will exceed the principal amount and interest on the
evidences of indebtedness to be issued. The director may in turn
direct the bank to make loans to the state general fund by
purchasing the evidences of indebtedness at interest rates
prescribed by the director.
(3) If evidences of indebtedness are issued and sold under
this section, the state treasurer shall establish a fund for the
repayment of the evidences of indebtedness and pay the principal
and interest on those evidences of indebtedness when due. The state
treasurer shall place all available general fund revenues into this
fund until the fund contains a sufficient balance for the repayment
of the principal and interest on the evidences of indebtedness when
due.
Sec. 17. The bank shall conduct all of its business under the
name "the Bank of Michigan". The bank shall obtain and convey title
to property pertaining to the operation of the bank in the name of
"the State of Michigan, doing business as the Bank of Michigan" and
shall execute any instrument or agreement in the name of the state
of Michigan. Within the scope of authority granted by the director,
the president may execute instruments and agreements on behalf of
the bank, including, but not limited to, any instrument granting,
conveying, or otherwise affecting any interest in or lien on real
or personal property. Other officers or employees of, and legal
counsel to, the bank may execute instruments or agreements on
behalf of the bank when authorized by the department.
Sec. 19. (1) A person may not file a civil action against the
state of Michigan on any claim for damages arising from any
transaction connected with the operation of the bank unless the
defendant in the action is designated as "the State of Michigan,
doing business as the Bank of Michigan", and the action is brought
in the court of claims. Except as provided in this subsection, a
person may file a civil action described in this section in the
same manner as any other civil action, and that action is subject
to the same provisions of law as other civil actions.
(2) For the purpose of applying any law or court rule
requiring a surety bond or other security as a condition to
asserting a claim, bringing a civil action, or appealing a decision
of a court or administrative proceeding, the bank is considered to
be the state of Michigan and security is not required of the bank
in that action or proceeding if the state generally would not be
required to provide security in that action or proceeding.
Sec. 21. (1) The auditor general shall contract with an
independent certified public accounting firm for an annual audit of
the bank in accordance with generally accepted government auditing
standards. The auditor general shall audit annually or contract for
an annual audit of the separate programs and funds administered by
the bank. On request of the auditor general, the director shall
assist the auditor general in selecting an auditing firm, but the
selection of an auditing firm is the auditor general's
responsibility.
(2) An auditor selected under subsection (1) shall prepare an
audit report that includes financial statements presented in
accordance with the audit and accounting guide for banks and
savings institutions issued by the American Institute of Certified
Public Accountants. The auditor also shall prepare audited
financial statements for inclusion in the comprehensive annual
financial report, as defined in section 402 of the management and
budget act, 1984 PA 431, MCL 18.1402.
(3) The auditor general may conduct performance audits of the
bank, including the separate programs and funds administered by the
bank.
(4) The auditor general shall report the results of any audit
under this section to the director and to the legislature. The bank
or its separate programs and funds shall pay the costs of the
audits.
(5) The department shall examine the bank at least once every
24 months and conduct any investigation of the bank that it
determines is necessary. The department shall report the
examination results, and the results of any necessary
investigation, to the director as soon as practicable and to the
legislature. The department shall charge a fee for any examination
or investigation under this subsection, at an hourly rate set by
the department as sufficient to cover all reasonable expenses of
the department associated with the examination or investigation.
Sec. 23. Pursuant to rules promulgated by the director, and
subject to 1978 PA 322, MCL 488.1 to 488.31, and any other
applicable state and federal law, the bank may establish a system
to provide fund transfer services to its customers and to the
customers of state-chartered and national or federally chartered
banks located in this state, and to other financial institutions
otherwise authorized to utilize the services of electronic fund
transfer systems, to acquire any equipment it considers necessary
to establish electronic fund transfer systems, and to make
reasonable charges for services rendered to other banks and
financial institutions under this section, as established by
the director.
Sec. 25. All of the following records of the bank are
confidential and exempt from disclosure under the freedom of
information act, 1976 PA 442, MCL 15.231 to 15.246:
(a) Commercial or financial information of a customer, whether
obtained directly or indirectly, except for routine credit
inquiries or unless required by due legal process. As used in this
subdivision, "customer" means any person that has transacted or is
transacting business with, or has used or is using the services of,
the bank, or for which the bank has acted as a fiduciary with
respect to trust property.
(b) Internal or interagency memorandums or letters that would
not be available by law to a person other than in litigation with
the bank.
(c) Information contained in or related to examination,
operating, or condition reports prepared by, on behalf of, or for
the use of a state or federal agency responsible for the regulation
or supervision of any activity of the bank.
(d) Information obtained by the bank from the department of
that is considered confidential information of the department or
the director under state or federal law.
(e) A report by a bank officer or member of the bank's
advisory concerning personal financial statements.
Sec. 27. The director shall promulgate rules concerning the
sale or lease of agricultural real estate acquired by the bank
through foreclosure or deed in lieu of foreclosure.
Enacting section 1. This act takes effect 90 days after the
date it is enacted into law.