President Unveils Sweeping Financial Re-Regulation Proposal

On June 17, 2009, President Obama introduced the most sweeping package of financial regulatory reform measures proposed by any administration since the early days of FDR's presidency. The proposal was unveiled in the form of a lengthy Treasury Department white paper entitled, "Financial Regulatory Reform--A New Foundation: Rebuilding Financial Supervision and Regulation," and can be found by following this Treasury Department link.

In brief, the proposal would create several new or reorganized regulatory authorities in the federal government; provide for subjecting certain large, highly leveraged, or highly interconnected firms to special scrutiny by the Federal Reserve and special rules for capital and liquidity; establish a council of federal regulators to monitor and police systemic economic risk; reform the regulation of certain financial market trading activities, especially securitization and derivative transactions; consolidate regulation of banks and thrifts within a "National Banking Supervisor" (essentially a reorganized, enhanced OCC, with the OTS and the thrift charter being eliminated); consolidate regulation of bank holding companies and functionally similar entities within the Federal Reserve; create a new consumer financial protection agency (CFPA) to police perceived abuses in consumer financial transactions; enhance international financial regulatory cooperation; provide new tools, approaches, and powers for the resolution of firms posing systemic economic risk; and establish an insurance oversight body within the Treasury Department called the "Office of National Insurance."

Although the administration's white paper is critical of current state insurance regulation in a number of respects, it also acknowledges that the current crisis is largely unrelated to insurance activities. The proposal does not contemplate any immediate material changes in the current structure of insurance regulation, the resolution (receivership) of failed insurers, or the operation of the current state-based system of guaranty association protection for consumers. However, the white paper does commit the Treasury Department to increased modernization, efficiency, and uniformity of insurance regulation, either by improvement at the state level or through the establishment of an optional federal charter.

House Financial Services Committee Chair Barney Frank has stated his intention to pass a bill in the House based on the President's proposals before the August Congressional recess. Senate Banking Committee Chair Christopher Dodd says that the Senate will take up the legislation in the Fall. Both Frank and Dodd predict passage of final legislation by the end of this year.

The key insurance-specific provisions are found on pages 39-41 of the 88-page white paper.

Texas Pre-need Insurer Placed in Receivership

Texas Memorial Life Insurance Company, a Texas-domiciled insurance company licensed only in Texas, was placed into receivership for the purpose of liquidation by a Texas court on June 10, 2009. The company issued insurance policies to fund pre-need funeral benefit contracts sold by its affiliate, Memorial Administrators, LLC d/b/a/ Texas Memorial Administrators, LLC. Memorial Administrators was also placed into receivership on June 10, along with TME Holdings, Inc. (the holding company of both Texas Memorial and Memorial Administrators). Robert Loiseau was named Special Deputy Receiver by the Texas Commissioner of Insurance.

This receivership is not related to the Lincoln Memorial/Memorial Service Life Insurance Companies receiverships, and the Texas Memorial insurance policies will be protected by the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association. Any questions concerning the receivership should be directed to Texas guaranty association Executive Director Bart Boles at [email protected].

MPC Chair Preference Poll Stage 1 Ballot Distributed

The Stage 1 ballot for the 2009 MPC Chair Preference Poll was mailed to all guaranty association administrators on June 15. The ballot is due by July 17, and instructions on completing the ballot were included with the ballot mailed to each guaranty association. Any administrator who did not receive a ballot should contact Preference Poll Subgroup Chair and current MPC Chair Bart Boles at [email protected].