NE1: The Northeast Regional Bank Act [Signed]

[Ѕenator Αverroës]

The Northeast Regional Bank Act

AN ACT to provide for the establishment of a Regional banking system, to provide for the management and oversight of revenues, to provide investment for the private economy, to establish effective oversight of economic activity in the Northeast Region, among other purposes.

Section 1.) The Bank of the Northeast (BNE), as it shall be named, is established to do the following:

    To assist local banks with capital and liquidity requirements
    To provide loans & loan guarantees
    To provide assistance to borrowers in areas of job retention
    To provide assistance to borrowers in technology creation
    To provide assistance to small businesses and businesses of retail
    To participate in community service projects


Section 2.) All revenues collected by the region shall be deposited in the BNE.

Section 3.) The BNE may not transmit services to other regions or countries unless funds are prescribed to via a budget item.

Section 4.) 35% of the bank's earnings must be remitted to the Treasury.

Section 5.) The bank will be responsible for keeping a record of all transactions and writing summaries which shall convey expectation and outlook of growth and inflation over each upcoming year.  The Treasury will be designated with the responsibility of annually checking the bank for organization of these records and efficiency in management.

Section 6.) No individual, co-partnership, or corporation shall be permitted to subscribe for or to hold at any time more than $25,000 par value of stock in the BNE.

Sponsor: Senator Scott
Debate time: 72 hours
Debate expires: 5:00 pm on Sunday, June 3

[Governor Scott]

Mr. Speaker, Governor Napoleon, honorable members of this Assembly,

The bill I have put forth is a version of a bill that I am currently deciding whether to propose to the Senate.  The primary purpose of this bill is to increase revenue for the region by establishing a bank which will not only bring us to a budget surplus, but stimulate our local economy as well.  As some of you might know, North Dakota (or 'Shock', in Atlasian terms) has been the only state in the country that was not significantly affected by the recession, and continues to run a budget surplus as well as have the lowest unemployment and the fastest job growth rate in the country.  The reason for this is not just that ND has an abundant supply of oil, some have found, but because that state maintains its own public bank that has raked in over $300 million in revenue.

As mentioned in the article:

Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. Earnings were fueled by a strong and growing deposit base, brought about by a surging energy and agricultural economy. We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.

The state deposits its tax revenues in the bank which ensure that a high portion of State funds are in the economy, and the bank is able to remit a portion of its earnings to the Treasury.  This stands in heavy contrast to California, which has no public bank to steer funds into productive investments within the state.  Instead, revenues are largely deposited into private banks, which funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the State Treasury.

This bill is, I believe, a positive move to boost our economy and help our budget at the same time.  I urge the Assembly to pass this.

[Ѕenator Αverroës]

I'll need to do some research of my own before I make a final decision, but you've made a solid case.

[Governor Scott]

Input from other Representatives would be appreciated.

[Simfan34]

I am busy, but let me say I am opposed to the government entering the banking sector.

[Governor Scott]

I am busy, but let me say I am opposed to the government entering the banking sector.

I encourage you to read the information I posted.

[IDS Legislator Alfred F. Jones]

I like this bill.

[LINCOLN REPUBLICAN]

I have a few questions.

Where would the bank executives be recruited from and what authority over bank affairs would they have?

What would be their compensation?

Will they be paid bonuses when a profit is realized?

What is to guarantee that this bank would not, at some time or other, require a government bailout?

[Governor Scott]

I have a few questions.

Where would the bank executives be recruited from and what authority over bank affairs would they have?

What would be their compensation?

Will they be paid bonuses when a profit is realized?

What is to guarantee that this bank would not, at some time or other, require a government bailout?

Ideally (though this is not specified in the current bill), the Treasury Department would be responsible for recruitment and compensating the executives.  The bill does not prohibit or permit bonuses, but such a provision could be incorporated into the text if the Assembly sees this fit.  The Treasury Department's oversight would play a role in preventing the need for government bailouts, but I will support amending the bill for more rules and preventatives if the Assembly feels that it would be necessary.  Of course, there's little chance that a bailout for this would be necessary, even during bad economic times, as North Dakota has shown, and it has not lost a single bank to insolvency over the last decade.

What specifically did you mean when you asked what authority the executives would have?

[LINCOLN REPUBLICAN]

Thank you for the reply Senator.

Regarding bank executives, most executives expect to have decision making authority.  That is what an executive is paid to do, make long range decisions that will further the interests of the organization.

That is why executives are paid the salary and compensation they receive. 

I would suppose in this system that the potential exists for some sort of a conflict arising between bank executives and the Treasury Department, as the executives may come to the conclusion that the Treasury Department bureaucracy is holding back the profitability the bank.

It seems to me, at this point in time, that this Regional Bank may become just another level of bureaucracy that businesses will have to deal with.

[Governor Scott]

Thank you for the reply Senator.

Regarding bank executives, most executives expect to have decision making authority.  That is what an executive is paid to do, make long range decisions that will further the interests of the organization.

That is why executives are paid the salary and compensation they receive. 

I would suppose in this system that the potential exists for some sort of a conflict arising between bank executives and the Treasury Department, as the executives may come to the conclusion that the Treasury Department bureaucracy is holding back the profitability the bank.

It seems to me, at this point in time, that this Regional Bank may become just another level of bureaucracy that businesses will have to deal with.

Well, yes.  The bank executives would obviously have, erm, executive authority.

As I've said, look at North Dakota and how that state has been prospering because of their public bank.  No problems between the Bank and the Treasury Department have arisen and businesses have been able to create more jobs thanks to the bank.  It is anything but a burdensome level of bureaucracy to them.

[Ѕenator Αverroës]

Debate time has expired. The Assembly will now vote on the legislation.

[LINCOLN REPUBLICAN]

Nay

[Rep Pyrofox]

Aye.
Though not quite ideally what I would imagine, creating a stable, government banking system is necessary to provide Atlasians with a stable future. Now if we could hand control completely over to the people instead of wealthy executives, we'd have something amazing :>

[IDS Legislator Alfred F. Jones]

Aye.

[Ѕenator Αverroës]

Aye

[Ѕenator Αverroës]

With 3 ayes and 1 nay, the bill is passed.