WASHINGTON BUREAU — Financial Stability Oversight Council policies lead to insurance industry interests being inadequately represented at the FSOC, a National Association of Insurance Commissioners official today told a congressional panel.
The U.S. Treasury Department, the parent of the FSOC, has taken “a very narrow and, in my opinion and the NAIC’s opinion, incorrect view” of the Dodd-Frank Wall Street Reform and Consumer Protection Act provision that established the FSOC, John Huff testified at a hearing of the House Financial Services Committee oversight subcommittee on the role and actions of the FSOC.
The FSOC is supposed to coordinate efforts to protect the stability of the U.S. financial system.
Huff, the Missouri insurance director, is the NAIC’s representative on the FSOC. He participates in FSOC proceedings as a non-voting member.
Huff said he has been restricted from consulting with fellow state insurance regulators on matters before FSOC.
That restriction “contradicts congressional intent and the deference accorded to state insurance regulators in the explicit language” of Dodd-Frank itself, Huff said.
“But, most importantly, it contradicts logic and reason,” Huff testified. “Quite simply, FSOC should want – and the U.S. taxpayers should demand – all the regulatory resources and expertise that their
regulators can provide to FSOC’s important work in protecting the U.S. financial system.”
Huff said he and Therese Vaughan, the NAIC’s chief executive officer, “sent a public letter to Treasury Secretary [Timothy] Geithner asking for him to rectify this issue.”
The NAIC has yet to receive a written reply, Huff said.
Huff reported that the FSOC has made some accommodations, but he declined to describe the accommodations.
Other witnesses at the hearing included representatives from the Treasury Department, the Commodity Futures Trading Commission; the Federal Reserve Board, the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
The Dodd-Frank Act says the FSOC should include a representative from the NAIC, the director of a new Federal Insurance Office (FIO) at the Treasury Department, and an independent member with insurance expertise.
Like the NAIC representative on the FSOC, the FIO director is supposed to be a non-voting member.
The independent member with insurance expertise is supposed to be a voting member.
The Treasury Department recently hired Michael McRaith, the Illinois insurance director, to lead the FIO. He will not take up the new position until June 1, Huff said at the hearing.
The Obama administration has not yet appointed the independent FSOC member with insurance expertise.