For Hispanics, financial security is a family affair. A recent survey found that 51 percent of Hispanics got help from their parents to cover the cost of education compared with 40 percent for the general population. The same survey also found that 22 percent of Hispanic parents have received financial support from their adult children compared with 9 percent for the general public.
At a time when government social safety nets are under increasing pressure and corporate pensions are all but disappearing, public policy should encourage opportunities for families to protect their financial futures. That’s why the House of Representatives should quickly pass the “Insurance Capital Standards Clarification Act of 2014.’’ Without this bill, consumers could see the cost of protecting their financial futures increase by as much as $8 billion, according to Oliver Wyman, a global management consulting firm.
The legislation, which has already passed the Senate by unanimous consent, ensures that the Federal Reserve has the authority to tailor its rules for insurance companies instead of regulating them in the same way that it regulates banks. This is important because in the wake of the 2008 financial crisis, Congress passed the Dodd-Frank Act which gave the Fed broad authority to regulate certain insurance companies. The Fed has a 100-year history of regulating the nation’s banking system but, until now, has never been an insurance regulator
Unless the House approves the legislation, the Fed says that it must regulate the insurance industry under the same capital rules that it regulates banks. But banking and insurance are fundamentally different businesses. Generally speaking, banks borrow short term and lend long term – for example, by taking liquid, short-term deposits and investing in illiquid long-term assets, such as mortgages. Life insurers, in contrast, generally write long-term policies and invest in long-term assets so that they can make good on their obligations – like life insurance policies – when they come due.
Imposing bank-centric rules on the insurance industry will make it more expensive for Americans to buy products that can protect their family’s financial future. Every year, life insurance companies provide billions of dollars to families through retirement, disability and death benefits. Unless the House acts, the Federal Reserve could be forced to adopt rules that make it harder for insurance companies to provide products that serve as a foundation for long-term financial security.
And insurance companies don’t just provide direct benefits to families. They are also an important source of funding for the energy and agriculture industries. In fact, insurance companies are among the largest agriculture lenders in California and play an important economic role for farms in every county in the Central Valley.
With so much at stake for the future of families and of our local economy, it’s time for the Republican-controlled House to declare victory in its efforts to begin reigning in some of the most unfortunate aspects of Dodd-Frank Act. The Democrat-controlled Senate passed the Insurance Capital Standards Clarification Act back in June and it’s time for Congress to do what’s right for the financial security of families and the nation’s economy.