U.S. House Systemic Risk Hearing, Senate AIG Regulatory Oversight Review March 5; New Democrat Coalition Plan Includes Insurance Regulatory Modernization

The U.S. House Financial Sevices Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises has scheduled a hearing entitled “Perspectives on Systemic Risk” on Thursday, March 5, 2009 at 10:00 a.m. 

Related information below includes:

• The U.S. House Financial Sevices Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises March 5 hearing announcement
• A Property Casualty Insurers Association of America press release entitled “PCI Pleased Systemic Risk Tops New Dem Reform Plan”
• A Regulatory Reform Plan outline from Illinois Congresswoman Melissa Bean and the New Democrat Coalition (includes information about the New Democrat Coalition)
• The U.S. Senate Committee on Banking, Housing and Urban Affairs Meeting Notice on “American International Group: Examining what went wrong, government intervention, and implications for future regulation”

Kanjorski Convenes First Systemic Risk Hearing

Washington, DC – Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the Subcommittee will hold the first in a series of hearings to examine how to improve the ability of the government to prevent private sector activities from putting at risk the stability of the U.S. economy.  The hearing will assist the Financial Services Committee in crafting legislation to create a systemic risk regulator for the financial services industry.

“The downfall of Long-Term Capital Management, the demise of Bear Stearns, the collapse of Lehman Brothers, and the unprecedented governmental assistance provided to American International Group are just a few examples of how the financial services industry can create systemic risk that endangers the broader economy and affects the daily lives of average Americans.  Many of our financial institutions have become too-big-to-fail or too-interconnected-to fail, and we need to protect the American economy from the whirlpool of risks that they pose by putting in place a systemic risk regulator with vigorous powers and a strong mandate,” said Chairman Kanjorski.  “This hearing will focus on securities, capital markets, insurance, and credit default swaps issues, and it will help us to better define what systemic risk is and map out how we can protect against it.  President Obama recently called on the Congress to take swift action to establish a modern regulatory structure for the financial services industry, and creating a systemic risk regulator is the first step that we must take.  I am committed to moving expeditiously in the 111th Congress to achieve this goal.”

 

PCI Pleased Systemic Risk Tops New Dem Reform Plan

February 27, 2009

WASHINGTON-David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI), today issued the following statement in response to the New Democrat Coalition’s release of 21 principles for financial services regulatory reform:

“We are pleased to see that the number one item addressed in the New Democrat Coalition’s plan is systemic risk. We agree that this is the top priority that Congress must address right now. Strengthening regulatory oversight of systemic risk is the critical need that Congress should address to protect our economy against a repeat of the current crisis.

“We have recently heard President Obama and House Financial Services Committee Chairman Barney Frank state that the number one issue to be addressed is systemic risk, and we applaud the New Democrats for also recognizing that this is the pressing need at this time. PCI has actively worked to help define the problem and to seek ways to solve it.

“PCI believes it makes more sense to regulate based on interconnectedness rather than on company size or market share. Systemic risk regulation of a company that poses no systemic risk would serve no purpose. That is why we agree that Congress needs to first address systemic risk, before assessing other separate deficiencies highlighted by the current crisis and returning to Congress’ long-term consideration of regulatory reform.”

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association.  PCI members write over $198 billion in annual premium, 40.5 percent of the nation’s property casualty insurance.  Member companies write 51.6 percent of the U.S. automobile insurance market, 39.7 percent of the homeowners market, 33.2 percent of the commercial property and liability market, and 38.7 percent of the private workers compensation market.

 

Bean and New Dems Release Regulatory Reform Plan

Centrist coalition’s 21 principles for reforming the financial system will bring stability, transparency

February 26, 2009
 
Washington, D.C. – With an eye on preventing future shocks to the American economy and improving the nation’s ability to compete on a global stage, Congresswoman Melissa Bean (IL-08) joined her colleagues in the New Democrat Coalition to announced a plan for regulatory reform of the financial services industry.

President Obama has said that new “rules of the road” for our financial system are critical to preventing another steep recession like the one Americans are experiencing now. As a Vice-Chair of the pro-growth New Democrat Coalition, and co-chair of its Financial Services Task Force, Bean has been working closely with the Obama Administration and Financial Services Committee Chairman Barney Frank to determine a broad framework for reform to our outdated regulatory system to ensure efficient and effective regulatory oversight, enhance market stability and transparency, and provide for robust consumer and investor protection.

“Regulatory reform may not be glamorous, but it is vitally important to creating a functional, sustainable financial system that families and businesses can count on,” Bean said. “We must avoid future breakdowns that jeopardize the value of our pensions, our homes, our businesses and our national economy.”

The New Dems released their 21 principles for regulatory reform at a Capitol Hill press conference Thursday. The New Dem Financial Services Task Force, co-chaired by Bean and Rep. Jim Himes (CT-04), crafted the principles, which will guide New Dem strategy on crafting legislation for the coming year.

As a caucus dedicated to restoring economic growth and improving America’s ability to compete in a global economy, the New Dems know the value of a smoothly functioning financial system to our small businesses and economy. With 16 members on the Financial Services Committee and many Members with private sector financial experience, the coalition has the expertise and the will to help Chairman Frank and the Administration guide a regulatory reform agenda through Congress.

The principles are as follows:

NEW DEMOCRATS’ PLAN FOR CREATING A 21st CENTURY FINANCIAL REGULATORY STRUCTURE

With the near collapse of our financial system last fall, the American people are expecting Congress to modernize and reform our financial regulatory structure.  The Democratic Caucus is looking to New Dems for leadership and counsel on these complicated issues.  New Dems are well positioned with 16 Members on the Financial Services Committee and many Members with private sector financial experience

As Congress considers comprehensive regulatory reform, New Dems will advocate efficient, effective regulation that strengthens consumer and investor protections and promotes market stability and transparency.  In addition we support legislation which creates uniform financial regulatory standards across national and international markets.

Efficient and Effective Regulation

• Create a systemic risk regulator that can monitor systemically important institutions and their counterparties to mitigate the risk of systemic collapse
• Reduce redundant regulatory structures in exchange for robust regulatory oversight
• Ensure oversight over new financial instruments that currently do not have regulatory oversight
• Require regulators to use prudential supervision to proactively work with those they regulate to prevent violations and keep communication lines open to better monitor efficacy and unintended consequences
• Increase coordination and communication between federal regulators through expansion of the President’s Working Group on the Financial Markets to include all federal financial regulators
• Modernize the regulation and oversight of the insurance industry to ensure adequate information and a consolidated U.S. position in international trade discussions.

Market Stability and Transparency

• Reform how regulators evaluate capital requirements when using fair value accounting values (mark to market) on hold to maturity assets in a temporarily impaired market
• Prohibit excessive leverage on debt and derivative instruments by requiring necessary capital reserves to prevent against the potential risk of default
• Create a countercyclical mechanism to temper extreme market fluctuations
• Support measures to prohibit manipulation that can lead to extreme fluctuations in securities prices that could destabilize fair and orderly markets
• Support open exchanges and price disclosure to increase transparency in opaque markets like the credit default swaps market
• Require lenders to hold a small percentage of loans in a first loss position to ensure originators retain some stake in the loans they underwrite
• Conduct a thorough review of rating agencies’ methodologies, models and compensation structures to ensure that ratings are accurate and not subject to conflict
• Hold Treasury accountable to regularly collect data from all federal sources that receive financial data from recipients of TARP funds

Robust Consumer and Investor Protection

• Aggressively pursue a multi-tiered strategy that prevents unnecessary foreclosures for credit worthy borrowers while protecting taxpayers and preserving the moral hazard principle
• Work towards reintroduction of mortgage reform legislation and pass into law
• Ensure that credit is available and appropriate for consumers through strengthened oversight and regulation of predatory loans while protecting businesses’ ability to price for risk
• Hold federal financial regulators accountable for enforcement of consumer and investor protections.
  Protect and continue to encourage simpler disclosure of status and terms and conditions of Americans’ retirement and investment accounts
• Reduce incentives for excessive risk taking and improve corporate governance by empowering shareholders
• Increase fraud prevention efforts

About the New Democrat Coalition

Founded in 1997, the New Democrat Coalition has built a reputation as the “go-to” group in Congress on the critical issues of economic growth, technological innovation, and national security. New Democrats are committed to enacting policies that encourage economic growth, maintain U.S. competitiveness, meet the challenges posed by globalization in the 21st century, and strengthen our standing in the world. With almost seventy House Members hailing from every region of the country, New Democrats are intent on modernizing the Democratic Party and the country.

 

About the Leaders of the New Dem Financial Services Task Force

Financial Services Task Force Co-Chair Congresswoman Melissa L. Bean (IL-08) is serving her third term in the House of Representatives, is a Member of the House Committee on Financial Services, and is Vice-Chair of the New Democrat Coalition.  Congresswoman Bean brings her 20-year business and entrepreneurial background to her role in Congress, having built revenues in sales management positions at leading technology companies before founding her own consulting firm in 1995, which for nine years served high-tech Fortune 1000 clients worldwide.

Financial Services Task Force Co-Chair Congressman Jim Himes (CT-04) is serving his first term in the House of Representatives and is a member of the House Financial Services Committee.   Congressman Himes most recently led the New York office of Enterprise Foundation, a nonprofit institution that combines the resources of private, public, and community organizations to address complex issues of urban poverty, after leaving his 12-year career at Goldman Sachs, where he served as a Vice President.

Additional Financial Services Task Force Members include Congressman John Adler, Congressman Andre Carson, Congressman Bill Foster, Congressman Ron Klein, Congresswoman Suzanne Kosmas, Congressman Dan Maffei, Congresswoman Carolyn McCarthy, Congressman Mike McMahon, Congressman Dennis Moore, Congressman Jim Moran, Congressman Ed Perlmutter, Congressman Gary Peters, and Congressman David Scott.

 

The U.S. Senate Committee on Banking, Housing and Urban Affairs Meeting Detail

Title: American International Group: Examining what went wrong, government intervention, and implications for future regulation

Date: March 5, 2009
Time: 10:00 AM
Place: 216 Hart Senate Office Building 
 
Witnesses 

Panel 1

• Honorable Donald Kohn , Vice Chairman, Board of Governors, Federal Reserve System
• Mr. Scott M. Polakoff , Acting Director, Office of Thrift Supervision
• Mr. Eric Dinallo , Superintendent, New York State Insurance Department  
   

 

Should you have any questions or comments, please contact Colodny Fass.

 

 

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