- The Washington Times - Saturday, October 24, 2009

The Obama administration Monday plans to unveil a new plan for dealing with troubled financial giants, a senior House lawmaker said Friday, adding that Congress is also eyeing potentially major changes for regulating the insurance industry.

House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat and a chief architect of the financial regulation overhaul, declined Friday to give details on the administration’s new bill, which would give the government the power to dismantle large financial companies that run into crippling balance-sheet problems.

The new draft bill is expected to take a tougher stance toward troubled financial firms than the administration’s original plan, and may remove some language that would have allowed for temporary bailouts.

Giving the government “resolution authority” would address the problem that some troubled financial giants have become “too big to fail.” Federal Reserve Chairman Ben S. Bernanke on Friday highlighted the need for this authority as well as other measures to reduce the likelihood that one firm could destabilize the financial system.

Mr. Frank also said Congress is discussing whether to create an optional federal charter for insurers. Insurance companies are currently regulated by states.

“If we do get into national chartering, it will be in life insurance … and maybe large commercial entities,” Mr. Frank said during remarks to a banking symposium.

He said lawmakers would not likely try to federally regulate property and casualty insurers, however.

The House financial panel has shifted its efforts to overhaul financial regulation into high gear in recent days.

On Thursday the committee voted to approve legislation that would create a federal financial consumer watchdog, a top Obama administration reform priority. It has also passed new rules to police over-the-counter derivatives such as the credit default swaps that helped fuel the financial crisis, and the full House has approved efforts to curb abusive pay practices.

While Mr. Frank’s committee has made significant headway, the reform effort faces an uncertain future in the Senate and may be pushed into next year.

One idea that does seem to be gaining steam in the Senate is the move to consolidate all federal banking supervision into one superagency. Currently, four regulators share the responsibility.

Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd, Connecticut Democrat, is a leading advocate of the consolidation, and has said he will push it forward despite regulators’ reservations. Mr. Frank, however, does not think the measure will pass.

“There is no remote chance of it happening,” he said.

He said lawmakers will likely merge the Office of Thrift Supervision and the Office of the Comptroller of the Currency, but allow the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) to keep their supervisory roles.

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