LEGISLATIVE UPDATE

TO: CEOs, Presidents & Legislative Contacts

FROM: Charles Miller, Director of Government Relations

DATE: January 15, 2009

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Legislators from Hoxie to Hope and from Lincoln to Lake Village converged on Little Rock so the 2009 Regular Session of the Arkansas Legislature could start on Monday, January 12, 2009. As I have since 2001 I will report in the Arkansas Banker magazine monthly regarding legislation of concern to our industry and send a weekly Legislative Update to every CEO.

During the first week of the session election results were confirmed and Speaker of the House Robbie Wills, D-Conway, and President Pro Tem Bob Johnson, D-Bigelow, officially took office. Speaker Wills named Rep. Eddie Hawkins, D-Vilonia, as chairman of the House Insurance and Commerce Committee and previously appointed Sen. Barbara Horn, D-Foreman, took her position as Chair of the Senate Insurance and Commerce Committee. These are notable appointments because they are the committees with jurisdiction over most banking legislation.

Many are aware that the Association and concerned bankers spent the past several months working on a legislative proposal that would create a centralized collateral system for all public funds in Arkansas. Believing that such a system would streamline the process and reduce over collateralization, the ABA board of directors voted unanimously for the Association to seek legislation and take the necessary steps toward setting up a program modeled after Mississippi, Tennessee and Alabama. The board and Bank Commissioner Franks felt strongly that this change represented sound public policy and would benefit Arkansas banks as well as Arkansas’ public depositors.

Obviously, in order to pass the collateral legislation the State Treasurer and other officials would need to understand and agree to such a change. Unfortunately, the State Treasurer and certain county treasurers could not be convinced that this type of system worked well and would benefit the taxpayers of Arkansas. Without their support we see no reason to ask the Legislature to consider this issue during the 2009 session. The good news, however, is that the State Treasurer has asked that a committee be formed to study the subject and consider legislation for the 2011 meeting of the General Assembly.

There may be some small legislative items we push for and I will keep everyone apprised of those as the session progresses. However, with the centralized collateral system off of the table it would appear that the majority of our time at the State Capitol will be spent playing defense. And I feel that we are in a good position to talk about Arkansas’ banks in a positive light. The main point we have been making to the press and that we will hammer home with legislators is that Arkansas banks are in good shape. Community banks did not get the country into this crisis and all policy makers must be careful not to create obstacles to future lending. After all community banks continue to be at the center of economic development in towns all across Arkansas.

I look forward to representing the industry at the State Capitol, and I hope I can count on you to make that “call from home” to your legislator if necessary. Please do not hesitate to let me know if you hear of anything that needs our attention.