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NAIFA GovWatch

U.S. Congress Holds Hearings to Examine Regulation of Financial Services

Issue: Financial Services Regulatory Reform

Date: March 6, 2009

Action Taken: Yesterday two key U.S. Congressional Committees held their first in what will be a series of hearings to examine the problems with the current financial services regulatory regime, and ways in which the structure could be reformed or enhanced.

The Senate Banking Committee (Chairman Christopher Dodd, D-CT) held a hearing to examine the financial crisis faced by American International Group (AIG) and what part state and federal regulators played in AIG’s financial troubles and subsequent recovery efforts. A summary of this hearing can be viewed at: http://www.naifa.org/advocacy/documents/AIG_hearing_03062009.pdf

In the House, the Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises (Chairman Paul Kanjorski, D-PA) held a hearing to examine systemic risk and what steps the government can take to close the regulatory gaps and inefficiencies that led to current recession. A summary of this hearing can be viewed at: http://www.naifa.org/advocacy/documents/HFSCmemo_02052009.pdf

The Month Ahead: The latest timeline for any initial Congressional action on regulatory restructuring legislation is by the August recess. In the meantime, President Obama will attend a G-20 meeting in London on April 2. In preparation for that meeting with world leaders, the President has asked Congress to develop initial recommendations on a framework for reform. In response, the House Financial Services Committee (Chairman Barney Frank, D-MA) has scheduled an aggressive schedule of hearings for the month of March. The hearings will cover issues such as mark-to-market accounting, AIG’s financial crisis, systemic risks, regulatory restructuring, and consumer and investor protection. The committee is also expected to advance legislation on predatory lending, mortgage reform, and credit card reform. In the Senate, the Banking Committee’s schedule is expected to include further hearings on regulatory restructuring, as well as at least one hearing to examine investor protections and regulation of the securities markets.

At the White House, efforts continue to hire staff to assist the President, Treasury Secretary Timothy Geithner, and other key officials with their efforts to address the financial crisis.

Next Steps: NAIFA is continuing to hold extensive meetings on Capitol Hill with key legislators and staff working to develop policy on how to restructure financial services regulation. Beyond the overwhelming call for systemic regulatory reform, very few members have specific ideas on what reform should look like. Many are looking to the hearings ahead and further discussions with interested parties such as NAIFA before they make any decisions.

As for NAIFA’s regulatory priorities of optional federal charter and NARAB II in the coming weeks, Reps. Melissa Bean (D-IL) and Ed Royce (R-CA) are expected to introduce a new iteration of the optional federal charter legislation they introduced in 2007. Senator Tim Johnson (D-SD) is also looking to introduce a companion Senate bill to the Bean/Royce bill. The new bills, which will be stripped from 300 pages to approximately 40 pages, are expected to include calls for a new national insurance regulator that works in concert with a new systemic regulator. The bill also will include an enhanced consumer protection structure that includes bricks and mortar satellite offices in all 50 states. As for NARAB II, NAIFA is continuing to work with our industry partners and Rep. David Scott (D-GA) to reintroduce NARAB II legislation this year.

As always, we will continue to stay engaged and to report on key hearings and developments that impact NAIFA members. We encourage you to continue to read NAIFA’s GovCommunications and to visit www.naifa.org/irr for the most up-to-date information on new developments.

NAIFA Staff Contact: For additional information, please contact Gary Sanders, Vice President – Securities and State Government Relations, at GSanders@naifa.org.

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