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A Safe, Secure Means of Investing? Try CRIS.
Who didn’t have at least a moment of anxiety as the Dow Jones tanked in recent weeks? Who didn’t look with some trepidation at downsized 401(k)s? Not Mike Milby, clerk of court in the Southern District of Texas, and 25 of his fellow clerks. Milby oversees a nearly $3 billion fund for the Judiciary that sailed through the downturn. “We didn’t have to worry about our money,” said Milby. Here’s why.
Back in the mid-1980s, Texas was in the midst of its own financial crisis, complete with the largest number of bank failures since the Great Depression. The clerk of court in the Southern District of Texas, like clerks in federal courts nationwide, served as the custodian for monies belonging to litigants, witnesses, and other participants during litigation, opening individual accounts at local banks for every case. For example, if an insurance company knew it would owe money to people in a case, the money would be held in an interest-bearing account until the case was decided and the parties received their money. The clerk of court would be responsible for the proper collection, maintenance, accounting, and disbursement of all monies.
At the time, Milby was a young financial administrator in the Southern District of Texas. “Enough banks were failing,” he recounts, “that our clerk of court Jesse Clark said he was having trouble sleeping at night, worrying about the safety and accessibility of our accounts.”
That’s when Milby came up with the idea of the Court Registry Investment System (CRIS). Essentially, CRIS pools all the money scattered among individual accounts and deposits it in the U.S. Treasury, buying Treasury bills, without depositing registry funds at a private financial institution.
“Pooling the money means we always have money to disburse when it’s needed, we don’t incur credit risk because the money is in Treasury bills, and we minimize interest rate risk by staggering the maturities,” said Milby. “Of course, permission for this unique arrangement had to be obtained from the Treasury and the Federal Reserve Board of Governors. The Treasury and the AO helped us set up the whole process. It was an exciting time for everyone involved.”
The Federal Reserve Board and U.S. Treasury agreed to set up an account for the court. In turn, the Southern District of Texas managed its own funds and those of other courts willing to deposit funds with them. Twenty-five federal courts currently participate.
“Every week, they send money and they take money out,” said Milby. “From $10 in a single case to $500 million, we track the earnings and the registry fees and give them a weekly report.”
“Because registry funds managed through CRIS never leave the Treasury, it is the safest, most secure means of investing these monies,” said George Schafer, assistant director of the Office of Finance and Budget at the Administrative Office. “Considering the current volatility of the financial market, if I were a clerk of court held responsible for these registry funds, I would jump at the chance to join CRIS.”
Even Treasury bills haven’t been immune to the recent financial crisis. At one point, interest on the bills was at zero percent. Was Milby concerned? “We didn’t invest that one day,” he said, “and by the next day interest was back up. We were never at risk.”
However, a recent event will impact how courts will be able to invest their registry funds. Enactment of the Judicial Administration and Technical Amendments Act of 2008 (Pub. L. No. 110-406) in October improves the courts’ ability to manage their registry funds, broadening investment options and offering an improved procedure for investing Treasury securities. The Act gives the AO Director authority to participate in the Federal Investments Program, managed by the Treasury Department, which has on-line transaction capabilities. There are no transaction fees, transactions are posted daily instead of weekly, and a wider range of Treasury securities are available than on the secondary market. Because it is unlikely the Treasury Department would be willing to deal individually with 180 district and bankruptcy clerks, the AO and the CRIS monitoring group has started to analyze the different implementation options and will develop policies and procedures, rules and regulations governing the program. This group’s recommendations will be vetted through the advisory process before being implemented.
Clerks who wish to discuss whether joining CRIS is right for them should contact Mike Milby at 713-250-5400.