By Sarah N. Lynch
WASHINGTON Nov 20 President Barack Obama's
nominee to serve as deputy U.S. Treasury Secretary told
lawmakers on Wednesday she believes that large systemically
important insurance companies should not face the same capital
rules as banks.
"A one-size-fits-all approach is not going to work here,"
Sarah Bloom Raskin told the Senate Finance Committee during her
"Insurance companies have a very different set of asset
liability structures than do banks. And to regulate them in
terms of a one-size-fits-all approach is not going to be an
effective form of supervision or regulation in my experience."
Raskin's views on the subject will be crucial for General
Electric Co's GE Capital, American International Group
Inc and Prudential Financial Inc, which earlier
this year were all designated by the U.S. risk council as
"systemically important" - a tag that carries new capital
requirements and supervision by the Federal Reserve.
Those three companies are still waiting to see how their
recent designations by the Financial Stability Oversight
Council, or FSOC, will exactly work.
As number two in command at the Treasury Department, Raskin
will have a lot of influence on policy decisions before the
FSOC, a body of regulators chaired by Treasury Secretary Jack
The FSOC was created by the 2010 Dodd-Frank Wall Street
reform law to police for systemic risks in the marketplace.
It has the power to classify large firms whose failure could
threaten financial markets as "systemically important financial
institutions" or SIFIs.
Certain large banks, including Goldman Sachs Group Inc
and Citigroup Inc automatically received the SIFI
The insurance companies are the only three non-banks so far
to be hit with the costly SIFI tag, and the designation process
has been met with some controversy.
In voting to designate Prudential, the FSOC's independent
insurance member Roy Woodall and Edward DeMarco, the acting
director of the Federal Housing Finance Agency, both dissented.
Prudential also initially tried to contest the designation
and requested a hearing to ask the panel to reconsider.
Last month, however, Prudential decided not to appeal in a
federal court, saying it would accept its fate as a SIFI.
Raskin's comments about how the insurance companies should
be regulated came in response to questions from New Jersey
Democratic Senator Robert Menendez, whose state is home to
Prudential's corporate headquarters.
Menendez told Raskin he wanted to "make sure that capital
standards applied to insurance companies are properly tailored."
Raskin, who most recently served on the Federal Reserve
Board of Governors, told Menendez he was "dead on" and said that
"fortunately the Federal Reserve has not gone ahead" and
regulated the firms like banks.
She added that the FSOC members with insurance expertise
will be able to offer "good insights" into how the new
regulatory regime should be tailored.
Raskin did not receive any questions or offer any thoughts
on whether large asset managers like Blackrock or
Fidelity should be next in line for FSOC designation.
The council is currently mulling whether large asset
managers pose risks to the system, and the industry has been
staunchly lobbying any potential designations.