2014 0520 - GOV (House) - Legislative Proposals to Reform Domestic Insurance Policy - Randy Neugebauer (R-TX)

  • 2014 0520 - GOV (House) - Legislative Proposals to Reform Domestic Insurance Policy, Randy Neugebauer (R-TX)  ---  [BonkNote]
    • [PDF-128p,   VIDEO-YouTube] - <Bonk: mp3, mp4>
    • Hughes, Schwarz, Ross, Sean Duffy - I'm very productive
    • question: would the case of Executive Life created a Systemic Risk?
    • House - Committee on Financial Services - Housing and Insurance
  • (p10) - Gary Hughes, ACLI - I would like to confine my remarks this afternoon to a single issue that is of paramount importance to life insurance companies, and that is the need to provide the Federal Reserve Board with the flexibility it believes it needs in order to apply insurance rather than bank capital standards to those insurance groups that now fall under its jurisdiction as a result of the Dodd-Frank Act. 
  • (p15) - Daniel Schwarcz, Law Professor -I am going to spend most of my oral testimony talking about several of the legislative proposals. But before I do that, I think it is important to foreground my remarks in certain facts that I think have gotten lost in this discussion.
    • Those facts include that AIG securities lending program was at the heart of AIG’s problems, in addition to its credit default swap portfolio. And that securities lending program, as mentioned earlier by one of the Members, was indeed subject to State regulation.
      • Those facts include the fact that financial guaranty insurers, monoline insurers, contributed mightily to the crisis, and they were regulated by State insurance regulators.
      • Those facts include that life insurers that had issued long-term guarantys, via annuities mostly, suffered severe capital shortfalls during the crisis that led several of them to apply for bailout funds and to receive bailout funds.
  • (p24) - Sean Duffy (R-WI) - Do we have the same kind of history in the insurance sector with creating systemic risk similar to that of the banking sector? Mr. Carter, do you know? Mr. Hughes? Anyone? You can jump in, chime in. 
  • (p33) - Brad Sherman (R-CA) - Who can comment on why we wouldn’t regulate credit default swaps as an insurance product?
  • Gary HUGHES, ACLI -  Personal opinion, it is a form of financial guaranty insurance. I think it probably should have been in a monoline company and not part of a multiline company.
  • Mr. SHERMAN. You are saying it should be part of a monoline company, but a regulated insurance company?
  • Mr. HUGHES. That would be my personal opinion, yes. 
  • (p33-34) - Daniel SCHWARCZ, Law Professor  - Correct, but monoline insurers, financial guaranty insurers did the exact same thing, and they failed miserably as well. State regulated insurance companies issuing financial guaranty insurers, they failed just as dramatically.
  • Brad SHERMAN (D-CA) - They failed to the point where they had to be bailed out?
  • Mr. SCHWARCZ. They didn’t—they failed to the point of insolvency, to the point of contributing mightily to the crisis, yes, because what happened is, all of a sudden, the financial guaranty insurers were providing—their classic business was to provide insurance against the default of local bonds and State bonds. When they failed and became insolvent to the point that no one had any faith in them, the entire bond market seized up because there was no financial guaranty—
  • Mr. SHERMAN. But we in Congress didn’t have to bail them out?
  • Mr. SCHWARCZ. I don’t believe that any of them received bailout funds