Financial Institutions Stabilization and Homeowner Protection Act, 1755
 13th Cortes Federales | |
| Long title | An Act to resolve the property-backed securities crisis of 1753 and 1754; to establish a temporary PBS Asset Resolution Authority; to provide for the recapitalization of the Caisse Régionale de l'Alduria; to establish a Homeowner Protection Fund; among other purposes. |
|---|---|
| Introduced by | Warren Ferdinand, Secretary of the Treasury |
| Extent | Entire Federation of Nouvelle Alexandrie |
| Dates | |
| Royal Assent | 14.VII.1755 AN |
| Commencement | 14.VII.1755 AN |
 | |
| Other legislation | |
| Amendments | None |
| Related legislation | |
The Financial Institutions Stabilization and Homeowner Protection Act, 1755 (Alexandrian: Loi de stabilisation des institutions financières et de protection des propriétaires, 1755; Martino: Ley de Estabilización de Instituciones Financieras y Protección de los Propietarios de Viviendas, 1755) is an act of the Cortes Federales of Nouvelle Alexandrie that resolved the property-backed securities crisis of 1753 AN and 1754 AN. It authorized a NAX€32 billion package of measures: a temporary PBS Asset Resolution Authority, the recapitalization of the Caisse Régionale de l'Alduria, and a Homeowner Protection Fund covering an estimated 185,000 households.
The Act was introduced by Treasury Secretary Warren Ferdinand and passed its third reading in the Federal Assembly on 7.VII.1755 AN, two days before the Aldurian Economic Diversification and Recovery Act, 1755. It was the second of three banking and recovery measures enacted under the confidence and supply agreement that sustained the government of Premier José Manuel Montero in the 13th Cortes Federales. The third, the Financial Concentration and Resolution Act, 1755, wrote permanent concentration limits into law later in the year.
The Act addressed the immediate damage of the crisis rather than its structural causes. It built on the deposit-insurance and supervisory framework of the Comprehensive Financial Stabilization Act, 1749 and complemented the administrative concentration limits the Federal Bank of Nouvelle Alexandrie had already imposed by directive. The property-backed securities market that the crisis exposed had been created by the National Housing Acceleration Act, 1742.
Background
The property-backed securities market originated in the National Housing Acceleration Act, 1742, which permitted financial institutions to bundle residential mortgages and construction loans into tradeable securities to channel private capital into housing construction. The market grew from approximately NAX€31 billion in 1738 AN to NAX€127 billion by 1753 AN, outpacing a monitoring framework the Federal Bank of Nouvelle Alexandrie (FBNA) had designed for a market a quarter of that size. The Federal Consensus Party had proposed caps on PBS holdings in 1751 AN, which the government rejected.
On 13.II.1753 AN, Treasury Secretary Warren Ferdinand disclosed to the Federal Assembly that banking-sector PBS exposure stood at NAX€127 billion, roughly three times prior public estimates, with eight institutions holding 71 percent of it. Enhanced FBNA stress testing identified the Caisse Régionale de l'Alduria, a cooperative serving about 640,000 depositors across Alduria and the Wechua Nation, as facing a NAX€2.9 billion capital shortfall. Depositor queues formed at its branches, and the institution closed most of the gap through a private placement before year's end. In I.1754 AN the FBNA imposed an interim 30 percent concentration cap by directive.
The crisis became a central issue in the 1754 general election. Under the confidence and supply agreement that followed, Premier José Manuel Montero's government committed to a banking-resolution program. This Act was its centerpiece, paired with the Aldurian Economic Diversification and Recovery Act, 1755 and followed by the structural Financial Concentration and Resolution Act, 1755.
Key provisions
The Act appropriated NAX€32 billion and directed it through three instruments. It also charged the Department of Treasury and the Federal Bank of Nouvelle Alexandrie with administering the package in coordination.
The first instrument was a temporary PBS Asset Resolution Authority, funded at NAX€20 billion, empowered to purchase, hold, manage, and dispose of property-backed securities from distressed institutions and to support the orderly resolution of any institution that could not meet its capital requirements. The Authority was time-limited and required to wind down once its mandate was discharged.
The second was the recapitalization of the Caisse Régionale de l'Alduria. The Act authorized up to NAX€3 billion in backstop capital, structured as subordinated debt convertible to equity and coordinated with the private capital the institution had already raised, so that public funds covered only the residual shortfall.
The third was a Homeowner Protection Fund of NAX€9 billion, directed at an estimated 185,000 households whose mortgages were affected by the correction in housing values. The Fund provided forbearance, refinancing, and payment assistance to owner-occupiers, and was administered alongside the deposit-insurance protections already established under the Comprehensive Financial Stabilization Act, 1749.
Legislative history
| Stage | Date | Chamber | Action | Votes (Y-N-A) | Details |
|---|---|---|---|---|---|
| 1 | 11.III.1755 AN | Federal Assembly | Introduction | – | Introduced by Treasury Secretary Warren Ferdinand |
| 2 | 28.V.1755 AN | Federal Assembly | Committee review | – | Reported by the Committee on Economic Affairs, Business, and Commerce |
| 3 | 7.VII.1755 AN | Federal Assembly | Third reading | 714–25–10 | Passed |
| 4 | 11.VII.1755 AN | Chamber of Peers | Passage | – | Passed under automatic-passage provisions for money bills |
| 5 | 14.VII.1755 AN | – | Royal Assent | – | Signed into law by King Sinchi Roca II |
The bill was a government measure, introduced two days after its companion diversification act and reported from the Committee on Economic Affairs, Business, and Commerce in parallel with it. It cleared the Federal Assembly on a broad cross-party vote, two days ahead of the diversification act, and passed the Chamber of Peers under the automatic-passage provisions that apply to money bills before receiving Royal Assent on 14.VII.1755 AN.
Bill as submitted to the "Hopper" of the Federal Assembly, 1755 AN
Financial Institutions Stabilization and Homeowner Protection Act, 1755
THE READING OF
A
BILL
TO
resolve the property-backed securities crisis of 1753 and 1754; among other purposes.
Financial Institutions Stabilization and Homeowner Protection Act, 1755
Presented by Warren Ferdinand, Secretary of the Treasury
Ordered, by the Cortes Federales of Nouvelle Alexandrie,
to be Printed, 11.III.1755 AN.
BE IT ENACTED by the King's Most Excellent Majesty, by and with the advice and consent of the Cortes Federales, in this present session assembled, and by the authority of the same, as follows:-
PART I
GENERAL PROVISIONS
Article 1: Citation.
- This Act may be cited as the "Financial Institutions Stabilization and Homeowner Protection Act, 1755".
Article 2: Definitions.
- For the purposes of this Act:
- "property-backed security", or "PBS", means a tradeable security bundling residential mortgages or construction loans, as created under the National Housing Acceleration Act, 1742;
- "the Authority" means the PBS Asset Resolution Authority established under Article 4;
- "the Fund" means the Homeowner Protection Fund established under Article 10;
- "distressed institution" means a financial institution that the Federal Bank of Nouvelle Alexandrie has found to face, or to be at risk of facing, a capital shortfall arising from its property-backed securities;
- "eligible homeowner" means an owner-occupier whose mortgage is in distress as a result of the correction in housing values, as prescribed by the Department of Treasury.
Article 3: Purpose.
- The purposes of this Act are:
THE PBS ASSET RESOLUTION AUTHORITY
Article 4: Establishment.
- There is established a temporary authority, to be known as the PBS Asset Resolution Authority, to manage the resolution of property-backed securities held by distressed institutions.
Article 5: Powers.
- The Authority may purchase, hold, manage, and dispose of property-backed securities acquired from distressed institutions.
- The Authority may, in coordination with the Federal Bank of Nouvelle Alexandrie, support the orderly resolution of a distressed institution that cannot meet its capital requirements, including by imposing losses on its shareholders and unsecured creditors before any commitment of public funds.
Article 6: Funding.
- There is allocated NAX€20,000,000,000 to the Authority for the purposes of this Part.
Article 7: Duration.
- The Authority shall be wound up once its mandate is discharged, and in any event not later than five (5) years from the commencement of this Act.
- On winding up, the net proceeds of the Authority's holdings shall be returned to the Treasury.
RECAPITALIZATION OF THE CAISSE RÉGIONALE DE L'ALDURIA
Article 8: Authorization.
- There is authorized up to NAX€3,000,000,000 in backstop capital for the Caisse Régionale de l'Alduria.
- The capital authorized under this Article shall cover only such part of the institution's capital shortfall as is not met by capital raised from private sources.
Article 9: Terms.
- Backstop capital provided under Article 8 shall be structured as subordinated debt convertible to equity, on terms that provide for its repayment to the Treasury.
THE HOMEOWNER PROTECTION FUND
Article 10: Establishment.
- There is established a fund, to be known as the Homeowner Protection Fund, funded at NAX€9,000,000,000.
Article 11: Eligibility.
- The Fund shall assist eligible homeowners, estimated at 185,000 households, whose mortgages were affected by the correction in housing values.
Article 12: Relief.
- The Fund may provide forbearance, refinancing, and payment assistance to eligible homeowners.
- Assistance under this Part is limited to owner-occupied principal residences.
Article 13: Administration.
- The Fund shall be administered by the Department of Treasury, in coordination with the Federal Bank of Nouvelle Alexandrie and the deposit-insurance arrangements established under the Comprehensive Financial Stabilization Act, 1749.
FUNDING AND OVERSIGHT
Article 14: Appropriation.
- There is appropriated the sum of NAX€32,000,000,000 for the purposes of this Act.
Article 15: Coordination.
- The measures taken under this Act shall be coordinated with the supervisory framework of the Federal Bank of Nouvelle Alexandrie and with the Comprehensive Financial Stabilization Act, 1749.
Article 16: Reporting.
- The Secretary of the Treasury shall report to the Cortes Federales each year on the operation of the Authority, the recapitalization, and the Fund.
CLOSING PROVISIONS
Article 17: Commencement and application.
- This Act shall apply to all of the Federation of Nouvelle Alexandrie.
- This Act shall not become law unless it has been given Royal Assent by H.M. King Sinchi Roca II.
- This Act shall be published in the Federal Gazette and made publicly available within seven (7) days of Royal Assent.
- This Act shall come into force on the day of Royal Assent.
- In the event any provision or part of this Act is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Act, shall be inoperative.
Amendments
No amendments to date.
Voting record
The Act passed the Federal Assembly by a broad cross-party majority. The Federal Consensus Party, which had called for action on property-backed securities since 1751 AN, voted for it in full, as did the Federal Humanist Party, the Wakara People's Party, and the Aldurian Independent Coalition. The Democratic Socialist Party voted largely in favor, with a minority opposing the bank recapitalization as a public rescue. The Civic Governance Alliance abstained.
Federal Assembly third reading (7.VII.1755)
| Deputy | Region | Party | Vote | Role/Notes |
|---|---|---|---|---|
| José Manuel Montero |  Wechua Nation |
FHP |  |
President of the Government |
| Émile Bouchard |  Alduria |
Independent | |
Coordinator of the Aldurian Independent Coalition; the Caisse Régionale serves Aldurian depositors |
| Francisco Gabaza |  Santander |
FCP | |
Leader of the Federal Consensus Party; "legislated the cure four years after declining the prevention" |
| Marcos Ferreira Gonçalves | Santander |
DSP | |
Leader of the Opposition |
| Tomás Iñiguez |  North Lyrica |
CGA |  |
Floor leader of the Civic Governance Alliance; the party abstained |
Vote summary by party
| Political party | Yes | No | Abstain | Total | % Support |
|---|---|---|---|---|---|
| Federal Humanist Party (FHP) | 372 | 0 | 0 | 372 | 100% |
| Democratic Socialist Party (DSP) | 178 | 18 | 0 | 196 | 90.8% |
| Federal Consensus Party (FCP) | 119 | 0 | 0 | 119 | 100% |
| Wakara People's Party (WPP) | 20 | 0 | 0 | 20 | 100% |
| Civic Governance Alliance (CGA) | 0 | 0 | 10 | 10 | 0% |
| Aldurian Independent Coalition | 12 | 0 | 0 | 12 | 100% |
| Independent | 13 | 7 | 0 | 20 | 65.0% |
| Total | 714 | 25 | 10 | 749 | 95.3% |
Analysis
The vote was less divided than that on the companion diversification act. The Federal Consensus Party had proposed concentration limits on property-backed securities in 1751 AN and been refused, and it supported the resolution package without reservation; its leader Francisco Gabaza noted that the chamber had "legislated the cure four years after declining the prevention." The Democratic Socialist Party backed the homeowner and depositor protections, which mattered to the Aldurian and Wechua communities the Caisse Régionale de l'Alduria served, though a minority of its deputies opposed committing public capital to a bank.
Opposition was small and crossed party lines, drawn from Democratic Socialist critics of bank rescues and fiscal-conservative independents who objected to the NAX€32 billion outlay. The Civic Governance Alliance abstained, as it had on the diversification act. The structural question the crisis had raised, the level at which to cap concentration, was left to the Financial Concentration and Resolution Act, 1755, which followed later in the year.
See also
- PBS banking crisis, 1753-1754
- PBS Asset Resolution Authority
- Caisse Régionale de l'Alduria
- Aldurian Economic Diversification and Recovery Act, 1755
- Financial Concentration and Resolution Act, 1755
- Comprehensive Financial Stabilization Act, 1749
