Oxley To Treasury: Halt OCC Moves

The clear intent of Congress, Rep. Oxley said, is that the states be the regulators for all the insurance activities of all persons, including the functional regulator for the insurance activities of national banks.

Rep. Oxley's letter came following a recent determination by the OCC that three sections of a Massachusetts law regulating bank insurance activities should be preempted.

For one thing, Rep. Oxley said, the OCC identified the wrong standard for evaluating whether a state law should be preempted.

GLB, he said, stated the preemption standard is whether a state law "prevents or significantly interferes" with bank insurance sales activities.

However, Rep. Oxley said, in its determination, OCC seeks to replace the GLB language with a standard that says a state law should be preempted if it "stands as an obstacle" to accomplishing the purposes of Congress.

The purpose of Congress, he said, is to use the "prevents or significantly interferes" standard, not the "stands as an obstacle" standard.

Moreover, Rep. Oxley said, Congress intended financial regulators to work out disagreements over state laws, not act unilaterally.

OCC should have tried to work out any disagreements with the Massachusetts insurance regulator before issuing a determination, he said.

And if an agreement could not be reached, Rep. Oxley said, GLB has a clear procedure to work out differences, which is an expedited dispute resolution with neither side given unequal deference.

"Accordingly, to the extent the OCC has any legal authority to argue against a state law or regulation, it should seek to overturn the offensive state provision in court, not to urge noncompliance by banks through unilateral opinion letters," Rep. Oxley said.

Rep. Oxley asked Sec. O'Neill to try to ensure that the OCC coordinates with the Massachusetts insurance regulator to resolve the issue.

In addition, he asked that the Comptroller inform the Financial Services Committee before issuing any further opinion letters preempting state insurance laws, including a description of his efforts to resolve the issue directly with the appropriate state insurance regulators.