Senate Banking Chairman Christopher Dodd (D.-Conn.) has unveiled his take on financial services reform.
Dodd’s bill seeks to vest more regulatory power to the Federal Reserve Board by creating an independent consumer watchdog housed within Fed and giving it oversight of over all financial firms with more than $50 billion in assets. To address systemic risks, the legislation calls for creation of an interagency council, which, by a two-thirds vote, could break up a large company deemed to posed a "grave threat” to the financial stability of the United States.
To the chagrin of insurers, the bill also calls for establishment of a fund to pay for the resolution of insolvent firms. The $50 billion fund would be bankrolled by assessments on the largest financial firms, including insurers.
Leigh Ann Pusey, president and CEO of the American Insurance Association, said including insurers was unfair given that they already pay into state-sponsored solvency funds. “Legislation that proposes to prevent future crises by forcing property/casualty insurers to pay into a pre-funded resolution mechanism or arbitrarily including insurers in a systemic risk regulatory regime penalizes stability, leading those same consumers and investors to unfairly conclude that the property-casualty sector is unstable and unreliable,” Pusey said in a statement. "Our consumers are already protected through existing insolvency and state guaranty mechanisms, which our industry funds to ensure that each and every insured claim is fulfilled. These mechanisms have a proven, decades-old track record of safeguarding insurance consumers. Even in the case of AIG, where problems from risky financial activities outside its regulated property and casualty subsidiaries led to its demise, we believe our industry could have withstood the collapse of its property/casualty insurance operations.”
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