Dodd-Frank: The Empty Seat

WASHINGTON BUREAU — Republican lawmakers are questioning how well federal regulators can take insurance interests into account without the Financial Stability Oversight Council (FSOC) having a voting member with insurance expertise.

The issue came up today when Lael Brainard, under secretary of the Treasury for international affairs, testified at a House Financial Services Committee hearing on the international context of financial regulatory reform.

The major federal financial regulatory reform package — the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 — has created the FSOC to help federal agencies track trends and events that could affect the stability of the U.S. financial system.

Dodd-Frank also created a Federal Insurance Office at the U.S. Treasury Department. The FIO director — Michael McRaith — and a representative from the National Association of Insurance Commissioners, Kansas City, Mo. — Missouri Insurance Director John Huff — are non-voting members of the FSOC. But the Obama administration still has not nominated an “independent voting member with insurance expertise.”

Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, and Rep. Shelley Moore Capito, R-W.Va., chairman of the panel’s financial institutions subcommittee, both brought up the FSOC issue when questioning Brainard.

Capito asked Brainard, “When will the voting member Insurance expert be appointed?”

Brainard said she had no answer on the timeline but would get back to Capito.

Later, Bachus told Brainard that, “Many of our members are concerned about the insurance voting member.”

Brainard said McRaith, the FIO director and former Illinois insurance director, is proceeding “right away” to set up the FIO.

At another point during the hearing, Brainard said, “Yes, it’s important that the insurance industry have representation” in dealing with insurance issues, such as international capital and liquidity standards, and