While the administration might be unhappy with the many questions by senators over the proposed government owned Charter Bank, Sen. Magalei Logovi’i says the community needs to have confidence that this is a safe financial institution and that their deposits will be well protected.

Magalei’s comments were made during a Senate Budget and Appropriations Committee hearing last week that heard ASG testimony on a bill that is the companion to the Charter Bank bill — establishing the Office of Financial Institutions as a regulatory arm for banking and money transfer services in the territory. (See Samoa News yesterday on the outcome of the OFI bill in the Senate.)

Magelei pointed out that provisions of the Charter Bank bill state that all government entities, including the authorities such as the ASG Employees Retirement Fund, should have their accounts with the Charter Bank, which will be called the Territorial Bank of American Samoa.

He asked if there is a conflict of interest with this Charter Bank provision and the right of the Retirement Fund board of trustees to protect the Fund.  Magalei, a former trustee member, says that under current law the board of trustees has the authority to invest and protect the fund.

American Samoa Economic Development Authority board member, Attorney General Talauega Eleasalo Ale responded that there is no conflict, because the language of the Charter Bank bill is specifically for the “operating fund” or the day-to-day operations account of the Retirement Fund, and other authorities, but not for all of the accounts of the Fund dealing with investments, which remain within the decision making authority of the board of trustees.

Magalei replied that this should be made clear in the Charter Bank bill: that it only refers to “operation fund accounts” for the entities. He believes that the Retirement Fund is an independent entity, and the board of trustees oversees the Fund.

In submitting the Charter Bank bill to lawmakers, Gov. Lolo Matalasi Moliga says the local charter bank is modeled after the Bank of North Dakota, a very successful state-owned bank originally chartered in 1919.

This was the same testimony by ASEDA officials when they testified in the Senate two weeks ago on the Charter Bank bill.

At last week’s hearing, Magalei wanted to know if the administration had done any research into the history of this North Dakota Bank and why the administration chose this type of bank for American Samoa, and whether it would be successful.

Commerce Department director Keniseli Lafaele, who is an ASEDA board member, explained that farmers started the North Dakota charter bank in 1919 after they faced problems in obtaining loans from the usual major financial institutions. So the farmers moved to set up their own charter bank to assist themselves with loans, as farming is the largest industry in that state, he said.

Lafaele also explained that the Federal Deposit Insurance Corporation did not regulate the North Dakota bank, yet it survived the Great Depression in 1929/1930 when the world economy collapsed. And even in 2008, with the great recession, this bank survived while the major banks were affected.

He went on to note that no other U.S. bank wants to set up in the territory, while efforts of the Community Bank of American Samoa have been unsuccessful in obtaining FDIC approval.  “So what other choice do we have? We have no other choice,” he said and asked senators to trust in God, who will help the territory move forward with the charter bank.

Additionally, he said, if Magalei has an option— to please share it with the government, to which Magalei responded, “I’m not against the charter bank” but the Senate wants to make sure that customers — the community — are protected.

Magalei also pointed out that there is a big difference between American Samoa and North Dakota.  For example, the territory has a population of 60,000 while North Dakota is a large state and farming is the backbone of the charter bank there. He says farmers in that state have money and that farming also plays a big role in that state’s economy.

Magalei then told the witnesses — who were ASEDA board members — that they should not be upset or unhappy when the Fono asks a lot of questions.  He said the government must provide an explanation so the community "has confidence” in the charter bank that their deposits “are secure.”

He said the big concern from the community is the fact that the charter bank is not FDIC insured, while a previous Senate committee hearing revealed that the government was looking at getting separate insurances for the bank assets and to cover customer deposits.

He said customers need to “feel safe” when their money is deposited in the Charter Bank.

The Senate version of the Charter Bank bill remains in committee for further debate while the House version was approved last Friday by the House and is now with the Senate Budget and Appropriations Committee. 

It’s unclear as to when the committee will make a decision to report to the bill to the full Senate floor for a vote.