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DAN MORALES March 30, 1992
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Mr. James L Pledger Opinion No. DM-99
Commissioner
Texas Savings and Loan Department Re: Whether certain governmental
2601 North Lamar, Suite 201 entities may lawfully deposit funds in
Austin, Texas 78705 the demand accounts of state and
federal savings and loan associations
and savings banks (RQ-220)
Dear Commissioner Pledger:
You have requested an opinion regarding whether certain governmental
entities organized under the laws of the State of Texas may lawfully deposit funds in
the demand accounts of “state and federal savings and loan associations and savings
banks,” which you refer to collectively as “savings associations.“l In particular, you
ask about the authority of municipalities, counties, independent public school
districts, and institutions of higher learning.
The authority of these governmental entities to deposit funds is governed by
statute. Chapter 105 of the Local Government Code authorizes municipalities to
deposit municipal funds in banks. Section 105.001 defines the term “bank” as,“a
banking corporation or association or an individual banker.” Chapter 116 of the
Local Government Code authorizes county commissioners courts to contract with
banks for the deposit of county funds. Local Gov’t Code 8 116.021.’ Like section
105.001, section 116.001 defines the term “bank” as “a banking corporation or
association or an individual banker.” This office has repeatedly stated that the
statutory definition of “bank” found in these sections does not include savings and
loan associations, and that savings and loan associations do not qualify as
depositories for these and other governmental entities without further statutory
‘In your brief, you appear to use the term “savings association” as defined by federal law, which
includes state savings and loans and federally chartered savings banks. 12 U.S.C. 9 1813(b). You state,
however, that ‘[qor purposes of analyzing authorized deposit-taking activities, these thrift institutions
should be considered collectively.” We use the term “savings association” only in characterizing your
contentions, and refer to and continc our analysis to “savings and loan associations.”
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Mr. James L. Pledger - Page 2 (DM-99)
authorization. Sre Attorney General Opinions MW-531 (19X2) (concluding thar
savings and loan associations may not serve as hospital district deposirories because
statutory terms “banking corporation, association or individual bank[s]” do not
embrace such entities); M-22 (1967) (concluding that former article 2549, V.T.C.S..
one of the predecessor statutes to chapter 116 of the Local Government Code, did
not qualify a savings and loan corporation as a depository for county funds); see ~1x0
Attorney General Opinions H-1013 (1977); H-723 (1975).
Subchapter E of chapter 23 of the Education Code, the School Depository
Act, authorizes independent school districts to establish depositories for the deposit
of school funds. Section 23.71 mandates that “[a] school depository. shall be a
bank located in the State of Tesas.“’ Subchapter A of chapter 5 I of the Education
Code governs the control of funds by certain state institutions of higher learning.
including the University of Texas and the Texas A & M University systems. See
Educ. Code $9: 51.001 (setting forth the institutions to which subchapter A applies),
61.003 (same). Section 51.003 of that subchapter provides that the governing boards
of such institutions may select “one or more depositories as places of deposit” for
certain school funds and shall deposit such funds “in tke depository hank or hanks.”
In Attorney General Opinion MW-272 (19SO). this office concluded that the term
“bank” in section 23.71 of the Education Code does not embrace sa\.ings and loan
associations. See uko Attorney General Opinion JM-42 (10%) at I (credit unions
may not serve as school district depositories). The same rationale appears to apply
to the terms “depository” and “depository hank” in section 5 1.003. Ser Attorney
General Opinion MW-272 (“savings and loan associations do not qualify as
depositories for political subdivisions without statutory authorization”) (emphasis
added).
You contend that the foregoin g attorney general opinions were written
before “the considerable expansion of the powers of savirigs and loans that occurred
after 1982” and imply that they should he overruled. In support of your contenrion.
you assert that savings associations are now insured by the Federal Deposit
Insurance Corporation pursuant to the federal Financial institutions Reform.
‘Section 23.73 ddincs a “hunk” as:
P. 502
Mr. James L Pledger - Page 3 (DM-99)
Recovery and Enforcement Act of 1989, and that federal and state law now
authorize federal savings associations and state savings and loan associations to
accept demand deposits from any person, see 12 USC. $1464(b); 12 C.F.R.
Q 545.12; see aLso V.T.C.S. art. 852a, 5 5.05 (providing that a state savings and loan
association may engage in any activity that is permissible for a federal savings and
loan association). You also assert that a federal court has “recognized that a savings
and loan association chartered in Texas is the functional equivalent of a Texas state
bank,” citing State of Texas v. Clarke, 690 F. Supp. 573 (W.D. Tex. 1988).3
In 1982, this office considered an argument almost identical to the one
asserted here. In Attorney General Opinion MW-534, the requestor contended that
“recent changes in laws governing savings and loan associations.. . might affect
prior opinions of this office regarding the eligibility of such associations. . . to serve
as county depositories.” Attorney General Opinion MW-534 at 2. We rejected this
argument, holding that
[allthough these changes provide the authority for.. . savings
and loan associations to perform some of the same functions as
banks, this alone’ does not provide the. . . requisite statutory
authority that would permit them to serve as county depositories
within the ambit of articles 2544 through 2558a, V.T.C.S. [the
predecessor statutes to chapter 116 of the Local Government
Code].
Id. As is clear from the foregoing, our prior opinions rely on the fundamental
principle that express legislative authorization is necessary to allow governmental
entities to deposit funds in savings and loan associations. Since 1982, the Texas
legislature has not seen fit to amend the applicable provisions of the Local
Government Code or the Education Code to authorize municipalities, counties,
school districts and institutions of higher learning to deposit funds in savings and
loan associations.4 Recent changes in statutes and regulations governing savings
3Another brief submitted in support of the Savings and LOan Department’s position suggests
that the Texas Savings and Loan Act, V.T.C.S. art. 852a, 5 6.14, authorizes governmental entities to
deposit funds in savings and loan associations. In Attorney General Opinion H-723, this office held
that that provision, standing alone, does not give any political subdivision the authority “to make
investments unaffected by legal restrictions found elsewhere in the law of this State.” Attorney General
Opinion H-723 at 4; see also Attorney General Opinion MW-534.
41ndced, a recent attempt to pass such legislation failed. See H.B. 1572, 72d Leg. (lW1)
(would have amended Local Government Code, chapter 105, to change the detinition of the ‘term
P. 503
Mr. James L. Pledger - Page 4 (DM-99)
associations. while they may affect the activities in which such associations may
engage, do not provide the requisite statutory authority that would permit these
governmental entities to deposit funds in savings and loan associations, and
therefore do not affect the continued validity of our prior opinions.
SUMMARY
Municipalities, counties, independent school districts, and
institutions of higher learning are not authorized to deposit
funds in the demand accounts of savings and loan associations.
Very truly yours.
DAN MORALES
Attorney General of Texas
WILL PRYOR
First Assistant Attorney General
MARY KELLER
Deputy Assistant Attorney General
JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General
RENEA HICKS
Special Assistant Attorney General
MADELEINE B. JOHNSON
Chair, Opinion Committee
Prepared by Mary R. Crouter
Assistant Attorney General
P. 504