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Looks like the House Financial Services Committee won't be taking up legislation that would create a Federal Insurance Office until Thursday. The matter has been on the table for weeks, but keeps getting pushed back as lawmakers wrangle over a broader systemic risk bill.
Thursday's also the day the Senate Banking, Housing and Urban Affairs Committee begins its consideration of Committee Chairman Chris Dodd's 1,136-page comprehensive financial services regulatory reform act. According to a notice put out by the committee, members will have until next Monday to submit amendments, and the committee will begin its consideration of the amendments the following Monday.
Given the complexity of the issues involved in both houses' approaches to financial services reform, and the time it will take to resolve differences between the bills assuming that both chambers pass legislation, it looks like it could be a long cold winter on Capitol Hill as 2009 turns into 2010.
Stay tuned.
—Mark A. Hofmann mhofmann@businessinsurance.com
The financial services regulatory reform bill unveiled the other day by Senate Banking Committee Chairman Chris Dodd, D-Conn., seems to pretty much cover the waterfront in terms of its subject. After all, this discussion draft runs an almost unbelievable 1,136 pages.
Given that size of this document, obviously virtrually everyone is going to be able to find something to like and something to dislike. But one thing risk managers ought to like is a little provision holding that certain financial services institutions would be required to create risk committees and further required to make sure that at least "one risk mangement expert" sit upon those committees.
That's just good sense. A lack of risk appreciation got certain companies into hot water not all that long ago and we're still paying for it. While the Risk & Insurance Management Society Inc. is right in holding that all publicly traded companies of a certain size should be subject to the same requirement, setting such a regulation for financial services companies to begin strikes me as a move in the right direction that could and should be built upon in the future.
—Mark A. Hofmann mhofmann@businessinsurance.com
Having been in a different time zone from Washington for several days, I didn't know what to expect when I returned from a TV- and Internet-free vacation.
I found that the House had passed a health care reform bill and that lawmakers were still wrangling over the finer and not so fine points of financial services regulatory reform. Neither of these activities particularly surprised me.
What did surprise me, though, was a letter signed by trade groups representing the entire spectrum of the property/casualty insurance industry, and then some, expressing strong opposition to some provisions in the House health care reform bill. The provisions in question dealt with the reach of the Federal Trade Commission into insurance matters and a controversial provision that would strip health insurers and medical malpractice liability insurers of the limited immunity from federal antitrust law they currently enjoy under the McCarran-Ferguson Act.
That property/casualty insurance trade groups would object to those provisions didn't surprise me. That they would all join together in their opposition did. After all, these are the folks that some of my sources refer to a circular firing squad, only too willing to do damage to each other as they pursue their own agendas. That the groups could agree to pursue a common agenda, albeit a limited one, was more than noteworthy.
Fortunately, that was about the only major surprise awaiting me. I don't know how I could have handled the Redskins changing their losing ways. They didn't, so there's at least one constant inside the Beltway this season.
—Mark A. Hofmann mhofmann@businessinsurance.com
It probably seemed like a cool idea at the time when a group of environmental activists pretending to be representing the U.S. Chamber of Commerce decided to hold a fake news conference at the National Press Club last week. Using official Chamber logos and other protected material, the activists known as the Yes Men said that the Chamber had switched its position on climate change legislation and now supported congressional proposals aimed at slowing climate change. It was all a hoax, of course, designed to attract attention.
Well, attract attention it did, of the legal variety. The Chamber first denounced the hoax, then sought to have what the Chamber called "a fraudulent Web site" set up by the Yes Men as an exact replica of the Chamber's real web site taken down, according to a statement released late Monday by the Chamber. When the web site stayed up, the Chamber didn't stay put and instead filed a civil lawsuit in U.S district court in the District of Columbia to protect its tradmarks and other intellectual property. In the statement, the Chamber said that the Yes Men "deliberately broke the law in order to further commercial interest in their books, movies, and other merchandise."
The Yes Men, said the Chamber, are "not merry pranksters tweaking the establishment."
There is something amusing about some anti-corporate types going entrepreneurial to sell their goods via hoax. But going after capitalism has made Michael Moore a rich man indeed. Given the time it usually takes a case to wind its way to a decision, odds are we've got quite a while to wait before we find out who gets the last laugh in this one.
—Mark A. Hofmann mhofmann@businessinsurance.com
Nowadays, the outcomes of congressional committee votes on major issues nearly always are totally predictable with Democratic and Republican members alike voting along party lines.
That is why it was somewhat surprising and a little dramatic when Sen. Olympia Snowe, R-Maine, broke party ranks when she voted in favor of health care reform legislation before the Senate Finanace Committee.
Sen. Snowe carefully explained that there was a lot she didn't like in the reform measure. But, she added, the status quo--a reference to ever higher health care costs and the growing number of uninsured--was unacceptable and therefore reform should move ahead.
Sen. Snowe made clear that congressional Democratic leaders and President Obama should not take her support for granted when she said: "My vote today is my vote today. It doesn't forecast what my vote will be tomorrow." In other words, stay tuned.
How refreshing. Here is a U.S. senator whose vote will be based on the merits--of lack of them--of a proposal. It is just a shame there are not more legislators in Congress like Olympia Snowe who think for themselves and do not blindly follow party line.
—Jerry Geisel jgeisel@businessinsurance.com
Everybody knows it's the season for reform on Capitol Hill. There's health care reform, which gets a lot of the attention. There's financial services regulatory reform, which gets a lot of the attention, too. And if Sen. Orrin Hatch, R-Utah, gets his way, Washington will soon be dealing with the reform of yet another crucial area of American life--college football.
Sen. Hatch sent a letter to the president yesterday requesting that the Department of Justice look into the Bowl Championship Series for possible violations of the Sherman Antitrust Act.
"Mr. President, as you have publicly stated on multiple occasions, the BCS system is in dire need of reform," wrote Sen. Hatch. "Some may argue that the college football postseason is too trivial a matter to warrant government involvement. However, given the amount of money involved in the BCS endeavor and its close relationship to our nation's institutions of higher education, it is clear that the unfairness of the current system extends well beyond the football field. Furthermore, I do not believe we should lower the standards of legal and ethical behavior simply because a case involves collegiate sports. If anything, our nation should hold our colleges and universities to a higher standard than we would a purely commercial enterprise."
Although I happened to graduate from a school that belongs to what Sen. Hatch called one of the six "privileged conferences" whose champions receive automatic bids to play in the BCS games, I've got a lot of friends who graduated from schools that belong to what Sen. Hatch called "non-privileged" conferences. I am sure this is one reform a lot of them can heartily endorse regardless of political persuasion.
—Mark A. Hofmann mhofmann@businessinsurance.com
What a difference a year makes.
Last fall and well into this year, any congressional hearing that had the three letters AIG in its title would have been a standing room only affair. Space at the press table would have been at a premium. Some would-be observers would have been banished to an overflow room. Others would have had to settle for a webcast.
And what would an observer have seen? A public display of righteous ire as lawmakers of both parties tried to outdo each other in condemning the fallen insurance giant. Common courtesy fell by the wayside. Some criticism sounded like veiled threats. Hell hath little fury like that of an outraged congressman.
But the legislative weather's changed a bit since then, as was evident yesterday as the House Oversight and Government Reform Committee heard the special inspector general for the Troubled Asset Relief Program discuss his findings concerning how well federal agencies have overseen AIG's compensation programs. A year ago, such a hearing could have become a four-ring circus before the witness even opened his mouth.
That wasn't the case yesterday. In fact, there were quite a few empty seats in the public seating area, at the press table and even on the committee itself. Fulmination was at a minimum as lawmakers politely asked Neil Barofsky, the special inspector general, about the Treasury Department's less-than aggressive oversight of retention payments and bonuses. While it is evident that lawmakers won't let the matter slide, it was also evident that cooler heads are prevailing now than was the case not all that long ago.
—Mark A. Hofmann mhofmann@businessinsurance.com
Scott E. Harrington is the Alan B. Miller professor of health care management and insurance and risk management at the Wharton School at the University of Pennsylvania in Philadelphia. Not surprisingly, he's one of the better known insurance scholars in the country. He recently prepared a paper entitled "The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation" for the National Assn. of Mutual Insurance Cos., a paper that he discussed this morning to a group of journalists and congressional staffers on Capitol Hill.
In the paper, Professor Harrington pays close attention to the idea of systemic risk and how regulators should confront it. Like many other observers, he sees problems in deeming some insurers so systemically significant that they cannot be allowed to fail.
"Despite AIG's enormous exposure to increases in mortgage defaut rates, it is not clear that any of its insurance subsidiaries would have become insolvent if the government had not intervened," he wrote. "Most of the federal assistance has been paid to banking counterparties. There can be little doubt that federal intervention was influenced by the desire to protect those counterparties."
He wrote that creating a systemic risk regulator for "insurers and other non-bank institutions designated as systemically significant would not be good policy."
"An overriding goal of any regulatory changes in response to the AIG anomaly should be to avoid extending explicit or implicit too-big-to-fail policies beyond banking. The creation of a systemic risk regulator and expanded federal authority over financially distressed insurers and other nonbank instuttions would very likely undermine market discipline and protect even more institutions, investors and consumers from the downside of risky behavior."
Mr. Harrington's paper can be found at http://www.namic.org/advocatenews/pdfs/090922_harrington.pdf
—Mark A. Hofmann mhofmann@businessinsurance.com
The Risk & Insurance Management Society Inc. sent a letter to members of the House Financial Services Committee yesterday endorsing the idea of requiring that all publicly traded companies of a certain size establish risk committees. While this is not a brand new idea, RIMS improved on it by holding that at least one member of the risk committee be an expert on risk management.
The committee, which hasn't been dealing with the risk committee issue, ought to take RIMS' contention that a risk management expert sit on any such committee very seriously. During the past little more than a year, we've seen companies headed by some very clever people falter or collapse because no one either understood the risk involved or chose to ignore it. Requiring that corporate governance include the creation of risk committees with at least one chair reserved for a risk management expert should provide an additional line of defense against such reckless behavior occuring again.
—Mark A. Hofmann mhofmann@businessinsurance.com
Until recently, if you had asked me whether or not I thought Congress will pass health care reform legislation this year, I would have said that I wasn't sure.
Now, though, I'm more optimistic about the passage of legislation.
The reason for my optimism: a two-word comment made last month by litttle-known congressman Joe Wilson, R-S.C., when President Obama spoke last month on health care reform before a joint session of Congress.
Rep. Wilson interrupted President Obama's address at one point to shout out, "You lie." His comments were not the first rude behavior--though it was the most dramatic--displayed in the debate on health care reform legislation.
In August, federal legislators appearing at Town Hall meetings on health care reform found themselves, at times, shouted down by reform opponents.
Opponents, though, haven't done much--beyond shouting--to lay out the case as to why reform is not necessary. As a result, whatever influence they had in swaying opinion against reform is ebbing.
At the same time, Senate Democratic leaders, most notably, Max Baucus, D-Mont., who chairs the Finance Committee, are backing legislation that can win congtessional approval, rather than bills whose appeal is limited to left-of-center Democrats.
—Jerry Geisel jgeisel@businessinsurance.com
