By Tim Devaney - 03/11/14 02:13 PM EDT
Sen. Susan Collins (R-Maine) on Tuesday accused the Federal Reserve of misinterpreting a piece of financial reform legislation she wrote four years ago.
Collins rallied Congress to adopt capital requirements for banks at the time, but said she never intended for the Fed to apply the same rules to insurers, because they have completely different business models that require their own, unique regulations.
“While the Federal Reserve has acknowledged the important distinctions between insurance and banking, it has repeatedly suggested that it lacks authority to take those distinctions into account when implementing the consolidated capital standards,” Collins testified at a hearing of the Senate financial institutions and consumer protection subcommittee.
“As I have already said,” Collins continued, “I do not agree that the Fed lacks this authority and find its disregard of my clear intent as the author [of the amendment] to be frustrating, to say the least.”
Collins said it is “improper” for insurers that are regulated by their respective states to instead face bank-centric federal regulations.
The senator wrote to the Fed in November 2012 to say as much, but the agency responded by saying it lacked the authority to regulate banks and insurers separately under her amendment. Collins has received wide bipartisan support from her colleagues, who say they agree the Fed took her intentions out of context.
Sen. Sherrod Brown (D-Ohio), who led the hearing, said he is working with Collins on legislation that would clarify the Fed's role in regulating insurers.
“If the Fed continues to disagree, I am committed to working with Sen. Collins and Sen. [Mike] Johanns to find a legislative solution,” Brown said at the hearing.
Johanns (D-Neb.), Jon Tester (D-Mont.) and Pat Toomey (R-Pa.) also expressed support for Collins' concerns.
“There is broad bipartisan agreement that providing traditional life and property and casualty insurance is different from banking,” Brown said.
“Capital rules must accurately measure and address the risks of the businesses to which they are being applied,” he added.