WASHINGTON — The Obama administration signaled unequivocally today that it opposes legislation that would ease up on federal regulation over the insurance industry.
“The president will not accept legislation that unravels Wall Street reform,” Jeffrey Zients, National Economic Council director, said. His remarks came during a meeting held to air financial services industry concerns about the Department of Labor’s proposal to impose a uniform fiduciary standard on sale of investment products into retirement accounts.
Zients referred to legislation known as “the Shelby bill,” which would significantly reduce the authority of federal agencies to regulate insurance companies. The bill was crafted by Sen. Richard Shelby, R-Ala., Senate Banking Committee Chair, and was reported out of committee last week.
In his opening remarks at a Bipartisan Policy Center meeting on the DOL proposal, Zients claimed that “Shelby pushed through a partisan bill designed to roll back Wall Street reform.”
“His goal here is clear, to weaken oversight over some of the largest financial institutions and tie one of the financial watchdogs (the FSOC) in knots,” Zients continued.
“We have seen this movie before, when lax rules and weak supervision” led to severe financial problems in late 2008 through 2010, Zients said, “and all the damage it caused.”
“The president has made it clear. No sequels here.”
Among other provisions, the Shelby bill would effectively bar designation of any financial institution as systemically important (SIFI) by the Financial Stability Oversight Council (FSOC) unless it had assets of more than $500 billion. The bill also would allow non-banks which have already been designated as SIFI to seek to “off-ramp” federal regulation after five years.
The bill would substitute current criteria for SIFI designation for institutions with less than $500 billion in assets with criteria proposed by the American Council of Life Insurers. These criteria would include size, interconnectedness, cross-border activity and complexity. It also would involve the National Association of Insurance Commissioners (NAIC) closely in the SIFI designation process.
The bill was passed along party lines, 12-10, after the panel, with the same vote, rejected an alternative proposed by Sen. Sherrod Brown, D-Ohio, that stripped out all provisions relating to federal insurance and big bank oversight. Brown is the ranking minority member of the committee.
Brown’s proposal would confine the legislation to issues dealing with community banks, credit unions and mortgage-related issues, as well as those providing greater consumer protections on financial issues for members of the armed services.
In comments after the vote, Shelby acknowledged that his bill was not going to be the last word on banking legislation this year and added that he would continue to work with Democrats over the summer to fashion a bill that would have enough votes to be enacted.
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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