Friday, May 21, 2010
Last nightâ€™s 59 to 39 Senate vote in favor of financial regulatory reform is the most extensive overhaul of financial-sector regulation since the 1930s, according to the Wall Street Journal. It notes that the Senate billÂ must now be reconciled with a similar bill passed by the House of Representatives last December, before it can be sent to President Obama to be signed into law.
In addition to a timeline of financial legislation, the WSJ article includes a useful summary of key parts of the Senate bill and where it differs from the House version. From the insurance industryâ€™s perspective, the takeaways are as follows:
- â€¢ Like the House bill the Senate version would create an Office of National Insurance within the Treasury to monitor industry and recommend to the systemic risk council insurers that should be treated as systemically important. The office would recommend ways to modernize insurance regulation, but it is explicitly not a new regulator.
- â€¢ A $50 billion resolution fund that would have been financed by assessments on the largest financial firms, including insurers, was removed from the Senate bill. In contrast, the House bill includes a $150 billion fund to be financed by large companies that would help pay for the liquidation of failing firms considered systemically risky.
- Â â€¢ The Senate bill creates a Financial Stability Oversight Council that would identify systemic risks to the economy, promote market discipline and respond to emerging risks. It also creates a new office at the Securities and Exchange Commission (SEC) that will administer credit rating agenciesâ€™ rules and practices.
- Â â€¢ The Senate bill creates a Bureau of Consumer Financial Protection within the Federal Reserve to oversee consumer financial products. In the House bill, the bureau would be independent of the Fed and exclude from oversight insurers, auto dealers and accountants, among others.