Frank To Draft OFC Proposal

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said today that a top panel priority will be working on legislation that would create an optional federal charter, “particularly for life insurers.”

Frank said at a news conference that he would leave the issue of future regulation of insurance to Rep. Paul Kanjorski, D-Pa., chairman of the panel’s Capital Markets Subcommittee.

“I will let Kanjorski figure it out,” Frank said.

Advocates of the optional federal charter approach to insurance regulation want to give insurers a choice between coming under the traditional state-run insurance regulatory system or coming under the jurisdiction of a new federal regulatory system.

One incentive for federal regulation of insurers is that European regulators have been pushing for the U.S. to establish an OFC, Frank said.

Frank said the committee’s first priority would be working on legislation establishing a systemic risk regulator covering all forms of financial activity, and that the new systemic risk regulator would have “some flexibility to decide what the risk is.”

Frank said he hopes to have a general outline of how the system risk regulation would work by April, in time for the upcoming meeting of the Group of Twenty Finance Ministers and Central Bank Governors, which is popularly known as the G-20.

Hedge funds and credit rating agencies will be evaluated as part of discussions to create a systemic risk regulator, Frank said.

There is an “emerging consensus” that the regulator is likely to be the Federal Reserve Board, and that it would be provided “with powers that do not currently exist to curb systemic risk,” Frank said.