WASHINGTON--Congress Thursday afternoon launched its effort to reconcile different versions of financial services reform legislation, with the goal of putting a final bill on President Barack Obama's desk before Independence Day.
Today's session was an organization session, with substantive talks scheduled to begin next week.
The Senate version of H.R. 4173, which will be the base text for deliberations, imposes stronger restrictions on derivatives trading and gives a proposed Office of National Insurance stronger authority to preempt state law in negotiating bilateral trade agreements with foreign countries.
Insurance industry members voiced concerns about whether a final bill should include language that would force insurance companies to help pay for the liquidation of a failed financial institution deemed a systemic risk.
The Senate bill also contains the controversial "Volcker rule," named after former Fed Chairman Paul Volcker, which would prevent U.S. financial institutions from proprietary trading or investment in and sponsorship of hedge funds and private-equity funds.
After the Senate voted for the legislation, USAA won Senate support for an amendment that instructs conferees to support a change in that provision that would exempt property and casualty insurers who only provide limited investment services to their customers through an insured financial institution.
State legislators have written a letter to conferees asking that the language in the Senate bill creating an Office of National Insurance with strong preemption authority be replaced with the much weaker language contained in the House bill.
The state legislators, through the National Conference of State Legislators (NCSL) and the National Conference of Insurance Legislators (NCOIL), also asked that state banking, securities and insurance regulators be added to the Financial Stability Oversight Council that would be created through the legislation.
Such a provision is contained in the House bill.
The Independent Insurance Agents and Brokers of America (IIABA) also supported the NCSL and NCOIL provision.
In a letter to conferees, Robert Rusbuldt, IIABA president and CEO, said "the House language--which would create a Federal Insurance Office (FIO)--is a carefully crafted compromise and the product of several years' worth of deliberation and consensus-building."
But nine other trade groups representing large insurance companies said in a letter to conferees that they support the current Senate language on the preemptive authority of the ONI.
"Enabling the U.S. to engage in and conclude international agreements with foreign nations on prudential insurance measures ensures uniform and equitable treatment for foreign and domestic insurers and reinsurers alike, fosters innovation and growth in U.S. markets, and promotes job creation," the letter said.
Both bills contain similar language reforming and modernizing the surplus lines and reinsurance markets by establishing the rules of a domiciliary state to govern regulation and tax assessment of these products. This language is likely to emerge intact from the conference.