ItICHARDS continued from page 1 hard to do. In Jesse James’ day, he played the money, Texas’ money, like a piano, moving moneys here to there, and the improvement that Warren Harding really did make was reducing the amount of money that we had in non-interestbearing accounts, from Jesse’s time. Was he moving the money for financial reasons or political reasons? I think a little bit of both, because there was a lot of float in moving that money from one place to another. The progressive step that Harding took, though, was to reduce those deposits that were demand deposits, and Jesse paid a lot of that for political purposes. So the $5,000 per bank, 1 think, is just a kind of hangover from that tradition. There was considerably more in Jesse’s day that was non-interest-bearing. The amusing part, I guess, of all of that is that the $5,000 per bank doesn’t mean anything to a bank in this state, so if it was there for any kind of political reason, there wasn’t enough for it to make any difference. That doesn’t mean anything even to a small bank? No. Five thousand dollars doesn’t mean anything to any bank in Texas, and in my campaign in talking to bankers. I told then that’s absolutely ridiculous. And all the banks agree. Some of them even claim it’s a burden, don’t they? Sure it is. I guess then we get down to the philosophy of why we use Texas banks. It you’re going to take Hartung’s premise, and that is that the good to the state of Texas comes from the interest that you make on your money and that’s the only thing that you should be looking at, then you’re liable to put that money out anywhere, to the highest bidder, in terms of interest. But what we have done in the state of Texas is to insist that the moneys that come from this state have to be secured principally by municipal bonds. And I think that’s probably my long suit in this race, that I did come from a local-government point of view. I think that if it were possible to require that state officials and members of the legislature have to serve on local government, whether it’s a city or a county or something, it would certainly be to the interest of the state because most of them don’t realize the implications and the impact of their actions on what happens to us on the local level. If we did not have that carrot or that impetus to purchase municipal bonds at a reasonable interest rate, then, one, it’s gonna be a burden on the counties and cities of Texas who’ve got to make those capital expenditures to make the improvements that in most cases that voters vote in favor of. When you talk about what it costs for Texas money, the premise that money going to the highest bidder is the only consideration is crazy, because the implications of what you’re doing to local economy really come through that impetus of buying municipal bonds. Which end are you going to pay? Are you going to pay on the local level or are you going to pay on the state level? I think that the ticket represents what the Democratic Party ought to be and says it is .. . this party is big enough for everybody. So you wouldn’t be in favor of banks bidding competitively for state deposits even if some kind of allowance could be made for small banks that might not be able to bid competitively with large banks? Well. I think at this point, my feeling is that the administration of that office is the number one priority, and until we put some sort of contemporary techniques in there to be able to manage the money initially and get a track record, let’s say in a year, until you start talking about these alternatives, and you think you’ve got an administratively functioning office, that’s at the point that you’re going to be intelligently talking about whether you’re going to be able to take the nuance of, or whether you’re going to allow little banks x percentage of the money and in Texas we’re not at that point yet. So categorically: no. I do not believe in competitive bids. I think it was Hartung who was talking about trying to make it possible for the state to put 100% of its money in interest-bearing accounts, and he was saying that would require some kind of computerized cash forecasting system. Would that be something you would work toward, after a year or so? Well, what I would work toward is first of all, you do not say, ‘Here is the answer for what we are going to do,’ until you know whether you’ve raised the question yet. All right, once you’ve got the office functioning administratively, and you’ve got some sort of forecasting system for expenditures cause Bullock right now does forecasting for income then you’re going to be able to determine how much of that money you’re going to be able to keep in time accounts. As a practical matter, let me give you an example of the way that office has been run in the past. I know everyone would love to say ‘Oh, the big terrible banks, they have run that office.’ The truth of.the matter is that I do not understand why the banks have tolerated the office being run in the fashion that it has, except that it’s always been done that way, and there’s always the question of rocking the boat and whether you want to change anything. Right now banks are required to put up a collateral in municipal bonds of up to a 120% of the face value of the bond. Some of those bonds, of course, are not worth what the face value is, some of them are worth more. The market value is by far a better indicator of the value of a bond. They can get a call and be told that by three o’clock this afternoon it might be 11 o’clock that morning we’d like to deposit $25 million in your bank. Then the banker scrambles around, borrows, begs, whatever, the collateral to be able to secure that money. Now we know in some instances from I think it was Rick Fish’s Dallas Morning News story, that the bond division in the treasurer’s office and the deposit division in the treasurer’s office do not necessarily talk to each other, and there have been times when deposits have gone into banks while the bond division is calling and telling them they can reduce their collateral. So there are times when the money even goes uncollateralized. All right. You call that bank and you tell them I’m going to send you x amount of dollars by 3 o’clock this afternoon, and they’re hustling around to get the collateral up to secure the money, then in two days they may be called and told ‘I want to withdraw 15 million.’ And they’re sitting there with a portfolio of municipal bonds that’s not all that valuable to them in any other kind of finan 4 JULY 23, 1982
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