National Association of Insurance Commissioners President Kevin McCarty has tried to reframe the debate over the too-big-too fail issue with systemically important financial institutions (SIFI) by saying, instead, that the key term should not be “too big to fail,” but rather, “too big to bail.”
McCarty spoke here at the NAIC Spring National Meeting in New Orleans to the Government Relations (EX) Leadership Council. He said that failure is part of the insurance model, and by designating a company as too big too fail, it encourages all kinds of behavior.
Instead, perhaps we take away the parts that are too big so it isn’t so risky, McCarty suggested.
Sen. David Vitter, R-La., a Senate Banking, Housing and Urban Affairs Committee member and also bailout opponent, there to speak to the group on Washington Congressional issues, also said he was concerned about the “too big to fail” label. He said Dodd-Frank in some ways institutionalizes “too big too fail.”
Vitter also warned the group that the U.S. Treasury’s Federal Insurance Office, while not a regulator, already has its foot in the door of federal regulation, as was the intent of the Dodd-Frank crafters, who had wanted even more. Vitter said the NAIC should “beware” of it and the Consumer Protection Financial Bureau (CPFB), also created under Dodd-Frank. Vitter said that the CPFB has “broad powers and little to no oversight.” The CFPB doesn’t include insurance complaints but still looms large should there be any major consumer protection debacle faulting insurance regulation.