DATE:MARCH 18, 2009

FROM:SUSAN NOLAN

NCOIL EXECUTIVE DIRECTOR

TO:NCOIL LEGISLATORS

RE:HOUSE FINANCIAL SERVICES COMMITTEE HOLDS HEARING

ON SYSTEMIC RISK REGULATOR

Below, please find web- links to the following articles:

  • Frank Hopes to Draft Overhaul Bill Soon (3/17 WTOP.com)
  • House Panel Considers Systemic Risk Regulator (3/17 Business Insurance)
  • Industry, Investor Advocates Testify on Systemic Risk (3/17 CNN Money)

Hearing video may be found at:

The U.S. House Committee on Financial Services yesterday held the first of four scheduled hearings to discuss “Perspectives on Regulation of Systemic Risk in the Financial Services Industry.” The hearing—which lasted nearly four hours—featured testimony from several financial industry officials and investor advocates on the need for a systemic risk regulator and how Congress should rework the regulatory structure to monitor the capital and risk management of firms deemed “too big to fail.”

COMMENTARY

As was the case in the March 5 hearing of theU.S. House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, there was a general sense among Committee members and panelists that a systemic risk regulator is needed to prevent future situations similar to those of Lehman Brothers and American International Group (AIG).

Although insurance company regulation wasn’t discussed specifically, most of the Committee and panelist remarks seemed to include it as part of a broader financial system in need of greater oversight. Additional hearings are scheduled for March 20, March 24, and March 26. Committee Chair Rep. Barney Frank (D – MA) said he hopes to begin drafting legislation as early as May.

COMMITTEE MEMBER/PANELISTREMARKS

The general sense among Committee members and panelistswas that the recent scenarios with Lehman Brothers and American International Group (AIG) occurred because there were either lax regulations or considerable holes in the current “patchwork” system—which many argued poses considerable risk to the American economy. Committee members differed, however, on the scope of a systemic regulator.

Panelists addressed the need for a systemic regulator and what an appropriate structure should look like. While most of the panelists agreed that such an authority was needed to help spot emerging issues in the financial services market, Mr. Peter Wallison of the American Enterprise Institute (AEI) argued against giving the federal government broad authority, saying it would “destroy competition in every market.” He also dissented on the panel’s prevailing opinion that the Federal Reserve is the best spot for such a regulator.

Other panelists included:

  • The Honorable Steve Bartlett, President & Chief Executive Officer, Financial Services Roundtable
  • The Honorable T. Timothy Ryan Jr., President and Chief Executive Officer, Securities Industry and Financial Markets Association
  • Ms. Terry J. Jorde, President and Chief Executive Officer, Country Bank USA on behalf of Independent Community Bankers of America (ICBA)
  • Mr. Travis Plunkett, Legislative Director, Consumer Federation of America(CFA)
  • Mr. Damon Silver, Associate General Counsel (AFL-CIO)
  • Mr. Edward L. Yingling, President and Chief Executive Officer, American Bankers Association (ABA)

For brief synopses of legislator and panel comments, I’d urge you to read the news articles provided above.

Feel free to contact Jordan Estey at 518-687-0178 or by reply e-mail should you have any questions.

© National Conference of Insurance Legislators (NCOIL)

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