January 18, 2018, Introduced by Reps. Howrylak, LaGrand, Yanez, Rabhi, Camilleri, Lucido and Hammoud and referred to the Committee on Regulatory Reform.


     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






     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




     (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




     (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




     (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




     (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




     (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




     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




     (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




     (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




     (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




     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




     (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



     (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




     (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.