WASHINGTON–Democrats have emerged from the election not only with control of the White House, but with a workable majority in Congress as they prepare to deal with a faltering economy and several insurance issues that are likely to be on the front burner.
They are projected to gain at least 18 seats in the House, giving them a 252-173 majority. In the Senate they appeared to gain only five seats for a 56-44 majority, short of the 60 needed to close off a filibuster.
The change comes amid speculation on a possible leadership change for the Senate committee that deals with insurance issues and industry concerns over how President-elect Barack Obama and the new Congress will handle issues ranging from an optional federal insurance charter to the Troubled Asset Relief Program and credit scoring.
In a note to members of the Council of Insurance Agents and Brokers obtained just after 9 a.m., Joel Wood, CIAB senior vice president, said, "Regardless of the outcome of all of these races, the first order of business in the new Congress is going to be enactment of a comprehensive overhaul of financial services regulation, including insurance."
He said the "over-arching theme of this epic battle, set into motion by the collapse of AIG [American International Group] and other major financial institutions, will be the management of systemic risk–particularly in complex financial services holding companies."
Mr. Wood said, "In multiple conversations with key congressional staffers and members of Congress in recent weeks, it is my belief that this battle will not be about the Optional Federal Charter."
He said the word "optional" might not survive the upcoming battle. "We are eager for this debate to be joined, excited about the prospects for some opportunities to improve regulation, yet wary about a potential federal overlay of laws that may do little to resolve the underlying inefficiencies of state-by-state regulation," he added.
Last week, Sheila Bair, chairman of the Federal Deposit Insurance Corporation, disclosed that members of Congress had asked her to consider the possibility of creating a deposit insurance program for insurance.
Adding to the problem is an apparent rift between the life and property-casualty industries over whether insurers should accept federal help under the Troubled Asset Relief Program (TARP).
Other issues are likely to include credit scoring, which is opposed by some key House members, and reauthorization of the National Flood Insurance Program, whose interim authorization runs out March 4.
A key issue there is whether the program should be extended to include wind coverage, which is strongly opposed by the insurance industry.
In other key developments for the insurance industry, Sen. Tim Johnson, D-S.D., was reelected and was expected to replace Sen. Chris Dodd, D-Conn., as chairman of the Senate Banking Committee when the Senate meets Nov. 17 to reorganize itself for next year.
Senate Majority Leader Harry Reid, D-Nev., speculated on that at the Democratic National Convention.
That move is expected to come about because Sen. Dodd has privately indicated an interest in taking over the Senate Foreign Relations Committee with the departure of Sen. Joe Biden, D-Del., to be vice president.
But, in his note to members this morning, Mr. Wood seemed to reject that speculation, writing that "the universe in Washington these days revolves around the TARP capital purchase bailout, so my gut (combined with wishful thinking) is that Dodd stays put, to shepherd the most comprehensive overhaul of financial regulations perhaps ever."
He added, however, that "if Dodd leaves, Sen. Tim Johnson will be the chairman of Senate Banking, and he'd be terrific."
Among definite changes for the Senate Banking Committee will be the opening created by the defeat of Republican member Sen. Elizabeth Dole, R-N.C.
Also defeated was Sen. John Sununu, R-N.H., who joined with Sen. Johnson to sponsor legislation creating an optional federal charter for insurers. He left the Banking panel earlier this year to become a member of the Finance Committee.
Less extensive changes are expected in the leadership of the House. Rep. Paul Kanjorski, D-Pa., current chairman of the Capital Markets Subcommittee of the House Financial Services Committee, will retain his chairmanship after winning a 13th term. Rep. Kanjorski beat back a strong challenge from Hazelton, Pa. Mayor Lou Barletta to win by about 10,000 votes.
But Rep. David Dreier, R-Calif., is expected to be named by the House Republican leadership to be the new ranking minority member of the House Financial Services Committee. He would replace Rep. Spencer Bachus, R-Ala., the current top-ranking Republican on the panel.
Rep. Dreier is in his 14th term and is currently the ranking minority member of the House Rules Committee. He was a top-ranking member of the FSC panel for several years and retained his seniority on the committee when he left to become chairman of the House Rules Committee when Republicans controlled the Congress.
Rep. Dreier was a key member of the committee when it dealt with the thrift crisis in the late 1980s and early 1990s and is seen as a strong supporter of an optional federal charter.
Sen. Obama is expected to be asked by the Treasury Department to move quickly to approve giving life insurers help under the TARP.
The Treasury Department has held off approving giving such aid, as requested by the industry, pending election of a new president. In fact, according to industry sources, no decision had been made to add insurers to the program as of yesterday.
President-elect Obama is also expected to be asked to appoint members to join a liaison committee to work with current Treasury officials in drafting legislation that will be presented to Congress next year creating a federal regulatory system for insurance companies.
But, in a television appearance last night, Robert Reich, former labor secretary in the Clinton administration and one of the economic advisers for Sen. Obama, questioned whether the new economic team would support extending the TARP program to insurers.
Top candidates to head the Treasury Department in an Obama administration are Timothy Geithner, 61, current president of the New York Federal Reserve Board, and Lawrence Summers, who served as Treasury secretary in the last years of the Clinton administration.
Mr. Geithner was promoted in 1999 to be undersecretary of the Treasury for international affairs and served under both Robert Rubin and Mr. Summers when they were Treasury secretaries in the Clinton administration.
President-elect Obama is expected to move quickly to name someone as Treasury secretary. Currently, as president of the New York Fed, Mr. Geithner oversees the loan the government is providing to prop up AIG.
Prompt action to deal with AIG may be needed because AIG is expected to issue its first earnings release since it received a government loan in return for a 79.9 percent stake Sept. 17. There is concern the information will point out the causes leading AIG to use $90.2 billion so far of the three credit facilities the government has provided through the Federal Reserve Bank of New York.
The total borrowing capability has risen from $85 billion under the Sept. 17 agreement to more than $143 billion currently.
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