Bill: Vote Federal Deposit Insurance Fund Establishment Act

[Omegabiebel]

A
BILL
To

Establish a dedicated Federal Deposit Insurance Fund to support the Financial Institution Depositor Insurance program​

The people of the Commonwealth of Redmont, through their elected Representatives in the Congress and the force of law ordained to that Congress by the people through the constitution, do hereby enact the following provisions into law:

1 - Short Title and Enactment

(1) This Act may be cited as the 'Federal Deposit Insurance Fund Act.'

(2) This Act shall be enacted immediately upon its signage.

(3) This Act has been authored by Senator CaseyLeFaye, Speaker Omegabiebel, and Lieutenant-Governor of the Federal Reserve Bank Stoppers.

(4) This Act has been co-sponsored by Senator CaseyLeFaye.

2 - Reasons

(1) To create a permanent financial safety net for depositors by establishing a Deposit Guarantee program backed by a dedicated, ring-fenced Federal Deposit Insurance Fund, ensuring the stability and integrity of the financial system in the Commonwealth of Redmont.

3 - Establishment of the Deposit Guarantee (FIDI)

(1) The Federal Government shall guarantee deposits of up to $100,000 per natural person and per legal entity, excluding sole proprietorships, per authorized financial institution.
(a) Deposits held by a sole proprietorship are treated as part of the owner's personal coverage.

(2) This guarantee shall be known as the Financial Institution Depositor Insurance and is compulsory for all registered deposit-taking financial institutions.

(3) All registered financial institutions are automatically considered authorized for the purposes of this guarantee.
(a) Non-compliant institutions may be deregistered by the Department of Commerce.
(b) Deposit protection remains in effect for 30 days following deregistration.
(i) Deposit protection does not apply for deposits made after the bank has been announced as deregistered.

4 - Federal Deposit Insurance Fund Structure

(1) The Federal Deposit Insurance Fund (FDIF) is hereby established to finance the FIDI guarantee program.

(2) The FDIF shall be:
(a) Held and operated as a tax-exempt DemocracyBusiness firm under government control.
(b) Managed and overseen by the Department of Commerce.
(c) A legally separate entity from general government operations, with ring-fenced assets.

(4) The FDIF shall not:
(a) Receive allocations from the Presidential Reserve;
(b) Be subject to monthly fiscal resets or general fund seizures;
(c) Be used for any purpose other than reimbursing depositors covered by the Deposit Guarantee.

5 - Investment Authority of the FDIF

(1) The FDIF is authorized to invest its idle balances in Commonwealth Government debt securities, including but not limited to:

• Treasury bonds
• Treasury bills
• Other debt instruments explicitly backed by the full faith and credit of the Commonwealth of Redmont.

(2) All such investments must:
(a) Be denominated in the official currency of the Commonwealth;
(b) Be low-risk and liquid;
(c) Have maturity terms aligned with the fund’s reimbursement obligations.

(3) Investment returns shall be:
(a) Retained in the FDIF to increase the fund’s capacity;
(b) Exempt from taxation;
(c) Reported in the FDIF’s monthly financial statements.

(4) The Department of Commerce shall manage these investments in consultation with the Federal Reserve Bank, and must adhere to best practices in government fund investment.

6 - Reimbursement and Liquidation Process

(1) In the event of a financial institution failure, reimbursements to depositors shall occur in the following priority order:

(2) Primary Liquidation Phase:
(a) The FDIF shall be used to fulfill the Deposit Guarantee Obligations.

(3) Secondary Recovery Phase

1. The institution’s own assets and liquid reserves shall be liquidated to reimburse the FDIF for the paid out Deposit Guarantee Obligations.
2. Any excess shall be used to repay the liabilities of the institution proportionally.

(4) Tertiary Recovery Phase:
(a) If 6(3) is insufficient, the personal and business assets of Directors may be seized and liquidated if the financial institution failure is the result of fraud, serious negligence or other criminal actions.
(b) Seizure must be executed with the least practicable disruption to the estate targeted.

(5) Final Government Backstop:
(a) If the Deposit Guarantee Obligations cannot be met neither with the FDIF, nor with the liquidations the DCGovernment balance shall be used, even if it results in deficit spending.

(6) Throughout this process, insured deposits under the Deposit Guarantee limit must be prioritized for reimbursement.

7 - Emergency Debt Issuance Authority

(1) If, after exhausting the entire reimbursement and liquidation process there are still outstanding obligations under the Deposit Guarantee, the Department of Commerce is hereby authorized to issue government debt securities for the sole purpose of fulfilling those obligations.

(2) These securities:
(a) Shall be backed by the full faith and credit of the Commonwealth of Redmont;
(b) May be issued directly to the public, financial institutions, or through government-administered bond offerings;
(c) Shall be exempt from income taxation on returns.

(3) All debt issued under this section must be:
(a) Recorded and tracked by the Department of Commerce,
(b) Reported to Congress within 14 days of issuance,
(c) Repaid using future FIDIT collections, Congressional appropriations, or other lawful means.

(4) This authority may only be used as a final backstop when all other sources of funding listed in Section 6 have been exhausted.

8 - Reporting and Oversight

(1) The Department of Commerce shall publish monthly FDIF balance sheet reports, P&L reports, and quarterly audits.

(2) Congress reserves the right to review, appropriate, or amend FDIF operations, but may not reallocate FDIF assets for unrelated government purposes.

9 - Definitions

(1) FDIF: Federal Deposit Insurance Fund

(2) FIDI: Financial Institution Depositor Insurance

(3) DOC: Department of Commerce

(4) DCGovernment Balance: The general financial reserves of the Commonwealth

(5) FIDIT: Financial Institution Depositor Insurance Tax


10 - Amendments

(1) The following shall be removed from the Taxation Act:

“9 - Deposit Guarantee
(1) The Federal Government will guarantee deposits of up to $50,000 per person, per authorised financial institution.
(2) All registered Financial Institutions are automatically covered under the terms of this deposit guarantee as authorised institutions.
(a) Institutions not compliant with this Act will be deregistered as a financial institution.
(b) Deposits will be covered by the Deposit guarantee for 30 days post-deregistration.
(c) The DOC is able to seize Financial Institution and Director/Owner assets to recover the costs to depositors. This process must be done with the least practicable disruption to the estate targeted.
(3) The Deposit Guarantee is Financial Institution Depositor Insurance (FIDI) and is compulsory for the stability of the financial system.
(4) The contributions of Financial Institutions serve to offset past and future payouts, but does not imply the existence of an exhaustive fund.
(5) Once s9(2)(c) has been exhausted, the DOC is pre-authorised to use unappropriated Government funds to satisfy the payment of the Deposit Guarantee to impacted depositors.”

(a) Subsequent sections shall be renumbered to reflect this change.

(2) Section 5 of the Taxation Act shall be amended as follows:

“(3) Revenue from the Financial Institution Depositor Insurance Tax shall be automatically allocated to the FDIF established under the Federal Deposit Insurance Fund Act.”