FRB – Federal Reserve Board

  • At the federal level, the Federal Reserve Board wants to track the NAIC developments.
  • It’s not trying to endorse anything or set policies, but it has an interest in both the research and supervision side because it’s held responsible for solvency.
  • So if a bank owns an insurance company and one of these financial services holding companies, the Federal Reserve is going to be setting standards for that company.
  • So it’s interested in these questions.

—  David K. Sandberg

2000 – SOA – Statutory Reserving Update-Life Products, rsa00v26n332pd – Society of Actuaries – 19p

  • Chairs
    • 1970 0201 – 1978 0131 – Arthur F. Burns – (7 years, 364 days)
    • 1978 0308 – 1979 0806 – G. William Miller – (1 year, 151 days)
    • 1979 0806 – 1987 0811 – Paul Volcker – (8 years, 5 days)
    • 1987 0811 – 2006 0131 – Alan Greenspan – (18 years, 173 days)
    • 2006 0201 – 2014 0131 – Ben Bernanke – (7 years, 364 days)
    • 2014 0203 – 2018 0203 – Janet Yellen – (4 years, 0 days)
    • 2008 05 – Current – Jerome Powell
  • Tim Geithner – FRBNY
  • Mark Van Der Weide
    • Chief of Staff for Policy, Division of Banking Supervision and Regulation, Federal Reserve
    • Deputy Director, Division of Banking  Supervision and Regulation, at the Federal Reserve Board of Governors
  • Thomas Baxter
  • Sarah Dahlgren
  • Scott Alvarez
  • Donald Kohn
  • Anna Paulson – [link]
  • Richard Rosen – [link] 
  • 3. Leverage in the financial sector.
  • The pandemic stressed the resilience of banks, but they remain well capitalized.
  • Leverage at broker-dealers also remains low.
  • In contrast, measures of leverage at life insurance companies are at post-2008 highs….. (p7)

2020 11 – FRB – Financial Stability Report – 98p — [link]

  • Financial Holding Companies – (Section 4(k) of the BHC Act) Section 3900.0 – 101p
  • federalreserve.gov/supervisionreg/topics/insurance.htm
  • Insurance Sales Activities and Consumer Protection in Sales of Insurance (Sections 4(k) and 4(c)(8) of the BHC Act)  – Section 3950.0
    • 3950.0.2 SUPERVISORY APPROACH FOR THE REVIEW OF INSURANCE AND ANNUITY SALES ACTIVITIES 
  • A number of other things happened in the summer of 1991 that didn’t receive a great deal of publicity.
  • Alan Greenspan called a meeting of the CEOs of large insurers in Washington to privately discuss the situation.
  • Senator Howard Metzenbaum (D-OH) had a meeting with the senior life insurance executives in Washington in which he told them that while he didn’t have the votes that day, if one more larger insurer was taken over, he would have the votes for federal control of the life insurance industry, and he meant it.
  • Of course, what also happened in the summer of 1991 very much increased concern by the state regulators.
  • None of the regulators wanted to be in the next state that would be surprised by a life insurance situation.

1995 – SOA – Liquidity: The Hidden Risk Factor, Society of Actuaries – 20p

  • 2009 0925 – GOV (House) – H.R. 1207, the Federal Reserve Transparency Act of 2009, Financial Regulatory Overhaul (CSPAN) – [PDF-223p, VIDEO-CSPAN]
    • Scott Alvarez (FRB) 
    • Barney Frank (D-MA): language is important
    • Ron Paul – Call for GAO to look at Federal Reserve
    • (p13) – Statement of Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System
      • However, Congress purposely and for good reason excluded monetary policy matters, including open market and discount window operations, from GAO review.
      • Considerable experience shows that monetary policy independence, within a framework of legislatively established objectives and public accountability, tends to yield a monetary policy that best promotes price stability and economic growth. H.R. 1207 would subject monetary policy matters to GAO audit.
      • Financial market participants likely would see this as a substantial erosion of the Federal Reserve’s monetary policy independence.
      • This would tend to undermine public and investor confidence in monetary policy by raising concerns that monetary policy judgments would become subject to political considerations.
    • (p38) – Mr. ALVAREZ (FRB). GAO audits government agencies, and you want the audit of a private entity.
      • I think that is something that Congress would have to change the authority of the GAO to allow.
    • (p39) – Ed Royce (R-CA) – ref: Volcker Testimony the day before
      • In his testimony to the House Financial Services Committee, Mr. Volcker said-and I am just reading from Bloomberg News, but we heard him say it yesterday-
        • ”Such a designation would imply government readiness to support the firms in a crisis, encouraging even more risky behavior in a phenomenon known as ‘moral hazard.”’
      • Would you like to comment on Paul Volcker’s opposition to having the Fed walk down this road with the Administration and his concern about the consequences of that moral hazard?
  • The Multidisciplinary Working Group was created this past summer, with the New York Federal Reserve chairing the group.
    • Commissioner Vaughan stated that the working group hopes to conduct a pilot disclosure program with a subset of international firms around the world.
    • The disclosure program would encompass items such as credit risk, liquidity risk, market risk and catastrophe risk.
    • Commissioner Vaughan stated that she would provide further details on this matter to anyone that was interested.

2000-1, NAIC Proceedings

  • Open Board Meeting June 7, 2012 – Capital Requirements

  • Open Board Meeting February 18, 2014

  • Apparently, the complexity of the organizations and their criss-crossing ownership permitted the officers of Baldwin to persuade the Federal Reserve to approve a situation in which a holding company owned both banks and other financial institutions, including insurance companies. 

—  Dick [Richard] Minck (Executive Vice-President of the American Council of Life [ACLI] Insurance and the newly elected Secretary of the Society of Actuaries)

1984 – SOA – Changes in the Canadian Regulatory Framework for Life Insurance, Society of Actuaries – 36p

  • 3. The last two switch points in Sept. 1979 and Aug. 1982 respectively correspond, roughly, with announced changes in Federal Reserve monetary policy.
    • a. Oct. 1979, the Fed announces its intention to switch its short run operating target for monetary policy from the federal funds rate to non-borrowed reserves.
    • b. Oct. 1982, the Fed began to put greater emphasis on stabilizing interest rates.
  • A more detailed description of these events and their impact can be found in the text book by Gordon 11.
    • 11 Gordon.RJ., Macroeconomics 3rd Edition. Little, Brown & Co., Boston (1984), pp. 513·519

1990 – SOA – Some Simple Models of the Investment Risk in Individual Life Insurance, B. John Manistre, arch90v27 – Society of Actuaries – 78p

  • 2012 – LC – McKinley v. Bd. of Governors of the Fed. Reserve Sys., 849 F. Supp. 2d 47 (D.D.C. 2012)
  • federalreservehistory.org/people/preston-martin
  • 2008 0131 – FRB – Federal Reserve Board Oral History Project – Interview with Steven M. Roberts, Former Deputy Director, Division of Banking Supervision and Regulation – 25p
    • MR. SMALL. During this time, Preston Martin was Vice Chairman and he had come from the thrift industry.
    • MR. ROBERTS. I think his claim to fame was the development of the secondary mortgage insurance market or private mortgage insurance.