WASHINGTON BUREAU — The insurance industry won two key changes in the financial services bill approved by the Senate Bank, Housing and Urban Affairs Committee.
One key change in the Restoring American Financial Stability Act bill would eliminate the need for all but one insurer to help pre-fund a “resolution authority,” or bailout fund, that could be used to resolve problems at troubled financial services companies that appear to pose a threat to the financial system.
The other key change would weaken an effort by Sen. Herbert Kohl, D-Wis., chairman of the Senate Special Committee on Aging, to create a financial planning oversight board and to impose a fiduciary “standard of care” on all sellers of retail investment products.
Sen. Christopher Dodd, D-Dodd, chairman of the Banking Committee, has been overseeing the drafting of the RAFSA bill, which is often called the Dodd bill.
Members of his committee passed the bill by a 13-10, party-line vote, but both Dodd and Republicans on his committee have suggested that they may be able to come up with a new, bipartisan version that can attract the 60 votes needed to reach the Senate floor.
Dodd and Sen. Richard Shelby, R-Ala., say they will meet during the upcoming two-week Easter recess to try to come up with a version of the bill that can get to the floor by the end of April.
The RAFSA bill markup is not “the end of the road, but rather just another step in the process,” Shelby says in a statement.
Sen. Robert Corker, R-Tenn., who negotiated with Dodd on a compromise before Dodd decided to go ahead with a markup of his own version, said during the markup that the bill has a 90% of passing.
“I think it’s probably true that we have a better opportunity with a different cast of characters — the full Senate — to do something that is sound, policy-wise,” Corker said
THE RESOLUTION AUTHORITY
A new Financial Stability Oversight Council would oversee the Resolution Authority. The FSOC would consist of 11 federal regulators, and one insurance representative appointed by the president. The Treasury secretary would lead the council.
The FSOC would focus on identifying, monitoring and addressing systemic risks posed by large, complex financial firms as well as products and activities that spread risk from one firm to others, Dodd says.
The FSOC would urge regulators to rein in companies that grow large enough and complex enough to pose a threat to U.S. financial stability, Dodd said.
An earlier version of the bill would have required “any” financial services company with more than $50 billion in assets to contribute to the Resolution Authority fund. The fund is supposed to accumulate about $50 billion in cash in 5 years.
Dodd used a manager’s amendment to change the provision to read, “and any nonbank financial company supervised by the Board of Governors” of the Federal Reserve System.