Fed Chief Backs OFC Concept

“No one has a better vantage point to observe the nation’s financial markets than Chairman Bernanke,” ACLI President Frank Keating says in a statement. “Insurance, banking and securities are interconnected in ways that policymakers never contemplated when the state insurance regulatory system was created a century-and-a-half ago. A national insurance regulatory authority that has the same status as federal banking and securities regulators would significantly enhance the ability of the federal government to identify systemic risk in the financial markets and address problems before they reach the crisis stage.”

ABIA Executive Director Kevin McKechnie said Bernanke’s testimony highlights the need to discuss the OFC strategy.

“This long overdue measure would create greater efficiency and modernization for the insurance regulatory system,” McKechnie said. ??To suggest that the states can appropriately police insurance companies with worldwide operations, when other nations are loudly suggesting a global systemic risk regulator, is na?ve. Clearly, solvency is a federal question.?

Bernanke also testified in Congress Tuesday, at a hearing of the Senate Banking Committee.

“One of the big problems is that, if we wanted to close down a major institution, we don’t have the legal authorities and the framework to do it,” Bernanke said. “Congress needs, in my opinion, to set forward a much more elaborate version of the Federal Deposit Insurance Corporation Improvement Act [of 1991] if you like, that would apply to large financial institutions of various types that would give guidance to regulators under appropriate checks and balances about under what circumstances the regulators could come in and shut down a firm in a safe way, that doesn’t disrupt the financial markets.”

But, Bernanke said, “absent those kinds of powers and that kind of framework, we really are having to play it by ear.”