Hearings Set On Regulatory Reform Proposals

NU Online News Service, June 12, 3:51 p.m. EDT

WASHINGTON–Treasury Secretary Timothy Geithner will outline the thinking behind the Obama administration's regulatory reform proposals Thursday in rare consecutive hearings before the Senate and House financial services committees.

The hearings will follow the expected unveiling of the administration's plan to reform regulation of the financial services industry on Wednesday, by Laurence Summers, chairman of President Obama's National Economic Council.

Actual legislation is not expected to be introduced, first in the House, for several weeks.

In comments today foreshadowing a debate that is expected to be lengthy, Mr. Summers described the details as "mind-numbingly complex."

The Senate Banking Committee will go first, holding a hearing in the morning in a large, rarely-used hearing room in the Hart Senate Office.

At 1:30 p.m., Secretary Geithner will again outline the administration's proposals in testimony before the House Financial Services Committee.

The two hearings will conclude a hectic week of hearings on financial services issues.

Tuesday, the Capital Markets Subcommittee will hold a hearing on systemic risk and insurance.

Included in those testifying will be Peter Skinner, a member of the European Parliament from the United Kingdom.

Also testifying will be representatives of the National Association of Insurance Commissioners, bond insurers, the Reinsurance Association of America, the National Association of Mutual Insurance Companies, the American Council of Life Insurers and the American Insurance Association.

Earlier this week, representatives of the Independent Insurance Agents and Brokers of America and the National Association of Mutual Insurance Companies sent letters to Mr. Summers and other members of the Obama administration asking them to retain state regulation of insurance.

In his letter, Robert Rusbuldt, president and chief executive officer of the IIABA, asked the administration to oppose any regulatory reform or financial services restructuring efforts "that could imperil the strength and stability of the state system of insurance regulation."

Mr. Rusbuldt said in his letter that the "administration faces many challenges as it considers how to improve and strengthen the current financial services regulatory regime, but the success of state insurance regulation – especially in recent months – offers a vivid reminder of that system's benefits."

He noted that members of the IIABA "strongly oppose displacing effective regulation with deregulation and an unproven regime that could be harmful to consumers, such as through current proposals to allow for an optional federal charter for insurance."

Similarly, Charles Chamness, president and CEO of NAMIC, said that although property/casualty insurance industry investment portfolios have suffered as a result of the financial crisis, "our industry is solvent, secure, and fulfilling its commitments to policyholders."

Mr. Chamness said, "With conservative and liquid investment portfolios, low leverage ratios, strong solvency regulation as mandated by state laws, and a highly competitive and diverse marketplace, the property/casualty insurance industry stands out as an island of stability in a sea of financial services turmoil."

He explained, "The relative strength of the industry in these difficult times demonstrates the effectiveness of the current system.

"It stands to reason that this model should not be disrupted or superseded through the creation of dual or mandatory federal regulatory models," Mr. Chamness concluded.