State and Local Government Deposits in the District: Laws and Deposit Allocation
Individuals and business firms in the United States have a significant amount of latitude in selecting financial institutions that will meet their needs for depository services. The choice may be made from any of the more than 14,000 commercial banks located in the 50 states, although in practice, most small account owners limit themselves to locally available alternatives. In addition, depository services are provided by approximately 5,000 savings and loan associations, more than 475 mutual savings banks, and more than 22,000 credit unions. While certain economic factors—such as transactions cost and travel time needed to conduct business—and noneconomic considerations—such as convenience of location—tend to influence the private sector's selection of alternative financial institutions, there are few legal barriers that have a direct impact upon the depository selection process. The one important legal barrier that limits the choice is that nonbank financial institutions are prohibited in most states from offering demand deposit services.