The National Association of Mutual Insurance Companies (NAMIC) called on members of the House Financial Services Committee to target the regulatory failures that led to the financial crisis as they take up financial services regulatory reform.
“As Sec. Geithner noted in his testimony, Chairman Frank has set an ambitious agenda for the committee to examine financial services regulatory reform,” said Jimi Grande, senior vice president of federal affairs for NAMIC. “We hope these hearings will result in reforms focused on the systems that failed rather than overreaching into areas that served the American people well during this crisis.”
State regulated insurers maintained their strength and stability throughout the economic downturn. Even in the case of AIG, the company’s property/casualty insurance operations played no role in its collapse.
“Insurance companies are not the same as banks, and state regulation of insurance protected consumers where others didn’t,” Grande said.
In testimony before the committee, Treasury Secretary Timothy Geithner focused on the administration’s proposal to identify “systemically significant” financial services firms whose failure could have far reaching effects on the overall economy. Under the administration’s plan these firms would be regulated directly by the Federal Reserve, and Geithner said the government would try to combat the perception that such firms are federally backed through strict regulation.
“We share the administration’s concern that labeling a financial services company, any financial services company, as ‘too big to fail’ will create a moral hazard,” said Grande. “However, it is not enough for the administration to substantially reduce that hazard. Regardless of the federal government’s intent, any firm classified as systemically significant will be perceived as backed by the government and could have a competitive advantage in the marketplace.”
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