The confirmation of Jacob Lew as secretary of the Treasury lateWednesday clears the way for action on several insurance-relatedissues, including the release of a long-delayed report oninsurance-regulation modernization.
|Indeed, at a hearing Wednesday, Rep. Gary Miller, R-Calif., vicechairman of the House Financial Services Committee, told FederalReserve Board chairman Ben Bernanke that, "There's a tremendousamount of havoc in that [insurance] industry today because of whatthey don't know [about federal regulatory initiatives]."
|Miller was referring to capital standards for insurers thatoperate thrifts as well as action by the Financial StabilityOversight Council on designating non-banks as systemicallyimportant financial institutions (SIFIs).
|Bernanke told Miller that the Fed understands that insurancecompanies are different from banks, but that it is constrained asto how it can regulate them differently by provisions of theDodd-Frank law that mandated that the Fed oversee nonbank SIFIs andthrift holding companies as well as pure banks.
|He also said that the Fed was considering conducting a study ofthe potential quantitative impact of new capital rules on insurancecompanies before it finalizes them, but has made no finaldecision.
|"We are discussing the feasibility of such a study and werecognize that there are important differences between banks andinsurance companies," Bernanke told Miller.
|"At the same time, of course, we have statutory constraints, theCollins amendment for example, that say that a certain amount ofcapital is necessary," Bernanke said.
|But, he added, "we have also heard from Congress about thisinsurance/banking distinction and we're looking at it veryseriously."
|Bernanke also disclosed that the Fed has been "consulting" withstate insurance regulators, with the Federal Insurance Office(FIO), with the industry, "with a lot of other stakeholders to makesure we understand these issues."
|Lew is chairman of the FSOC. And, the Fed would oversee"significantly important financial institutions (SIFIs) and now hasauthority to oversee insurers who operate thrifts.
|AIG and Prudential Insurance Co. ofAmerica have confirmed that they have been notified thatthey could potentially be designated as a non-bank SIFI, but thosefirms are still in a holding pattern, waiting for a finaldetermination. MetLife likewise could beconsidered for non-bank SIFI designation, but to date has notreceived any formal notification that a designation may be in theworks. A Treasury Department spokesman declined comment. "I wouldrefer you to our language in the interpretive guidance," thespokesman said.
|"The FSOC does not intend to publicly announce the name of anynonbank financial company that is under evaluation before a finaldetermination with respect to such company," the spokesmansaid.
|Lew, 57, was confirmed by the Senate, 71-26. He is scheduled tobe sworn in as Treasury secretary at 12:30 p.m. at the White Houseby Vice President Joe Biden, according to a statement from theWhite House.
|Lew will immediately return to the Treasury Department from theWhite House to chair that meeting.
|As for the report on insurance regulation, mandated under theDodd-Frank Financial Services Modernization Act, the FIO, an agencywithin Treasury, was supposed to release it lastJanuary.
|Industry officials surmised it was delayed in part because theWhite House and Treasury officials wanted a new Treasury secretaryto sign off on it before it was released. Treasury officials havedeclined comment.
|Lew would succeed Timothy Geithner, who announced last year thathe would not serve as Treasury secretary during President Obama'ssecond term. Geithner now serves as a senior fellow at the Councilon Foreign Relations in New York.
|Lew brings different skills to the job than Geithner. Lew is abudget expert, and has served as budget director for both Obama andPresident Bill Clinton.
|Geithner served as president of the New York Federal ReserveBank before being named Treasury secretary in January 2009.
|Corrected to show that MetLife had not received a formalnotification regarding a possible SIFI designation.
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