WASHINGTON A group of Republican lawmakers on Tuesday accused U.S. regulators of "disparate treatment" of nonbank financial firms that are currently being considered for tougher oversight.
The lawmakers, led by Representative Scott Garrett of New Jersey, said that in trying to identify companies so large that their failure could pose a potential threat to financial markets, regulators have considered more analysis and public feedback on asset management firms than they did about insurance companies.
The Financial Stability Oversight Council (FSOC), which brings together various U.S. financial regulators, last year dubbed American International Group and Prudential Financial as "systemically" risky, which means they will be subject to strict oversight by the Federal Reserve.
Regulators have also been studying risks posed by asset managers and their activities, but none have received this designation so far.
"This disparate treatment has led to uncertainty in the insurance industry and raised concerns that the council's approach to insurance company designations is to 'designate first, ask questions later,'" the lawmakers said in a letter to Treasury Secretary Jack Lew, who heads the FSOC.
The council was formed in response to the 2007-2009 crisis and charged with watching for risks to the financial system. It has also designated as risky General Electric's financial services unit and is expected to name a third insurer, Metlife, as risky as soon as this week.
Garrett and six other Republican lawmakers said in their letter that the regulatory council's research arm has published a study on asset managers, held a public conference on the industry and asked staff to take a more detailed look at specific products and activities.
But it did not take those steps before designating insurers as risky, the lawmakers said. The council also did not do an industry-wide analysis of insurers even after an advisory panel recommended it, they said.
"It seems appropriate that the council, at a minimum, should apply the same level of analysis and due diligence for the insurance industry as it has for the asset management industry before formally considering whether to designate another insurance company," the lawmakers said.
In addition to Garrett, the letter was signed by six other representatives: Spencer Bachus of Alabama, Ed Royce of California, Steve Stivers of Ohio, Sean Duffy of Wisconsin, Mick Mulvaney of South Carolina and Dennis Ross of Florida.
A Treasury spokeswoman confirmed receiving the letter and said the department plans to respond.
(Reporting by Emily Stephenson; Editing by Leslie Adler)