Glans earned a Master’s degree in political studies from the University of Illinois at Springfield. He also graduated from Bradley University with a Bachelor of Arts degree majoring in political science. Before coming to Heartland, Glans worked for the Illinois Department of Healthcare and Family Services in its legislative affairs office in Springfield. Glans also worked as a Congressional Intern in U.S. Representative Henry Hyde’s Washington D.C. office in 2004.
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With tough new financial regulations on the way for thousands of banks and financial services companies as part of the Dodd-Frank Act, industries are shuffling to position themselves outside the Federal Reserve’s new authority. In a recent article from the National Underwriter, the American Insurance Association lies out its case against increased regulation in a letter to the Financial Stability Oversight Council.
“In its letter, the AIA said p&c companies should not be subject to such supervision because, while “essential” to the U.S. financial system and overall economy, they do not pose a threat to financial stability.
The AIA said P&C companies “do not present leverage to the economy and do not have an infrastructure maintenance function.”
J. Stephen Zielezienski, AIA senior vice president and general counsel, signed the letter, which states, “There is little evidence of insurance either generating or amplifying systemic risk, within the financial system itself or in the real economy.”
AIA noted that this is because insurance companies operate under a different business model than other financial firms, based on an “inverted cycle of production” where premiums are received up-front. “This means that the product—the contractual promise to pay an agreed amount only if a particular event occurs in the future—is sold at a price, the insurance premium, which has to be estimated before knowing the actual cost of the product which depends on probabilities of occurrence and severity of future events,” the letter states.”
Under Dodd-Frank, companies that are determined to be “systemically important” to the economy as a whole will be required to submit to oversight from the Federal Reserve, a fate many companies would like to avoid. According to the Wall Street Journal, every firm from hedge funds to community banks is selling their case to avoid additional oversight.
“Companies across the financial-services industry are aggressively seeking to avoid being subjected to tougher regulation—and to make sure their competitors are.
At issue is a new regulatory designation created by Congress’s overhaul of finance rules earlier this year, in which firms classified as “systemically important” would have to comply with additional rules and submit to oversight from the Federal Reserve.
Life insurers, hedge funds and asset managers are pelting regulators with arguments for being exempt. On the other side, outside groups as well as some from within the financial-services industry are lobbying to have these very firms and others subject to the new regime.”
With so many important financial firms fleeing for their lives away from the new financial regulations, both the effectiveness and consequences of the Dodd-Frank Act need to be questioned. What effect will these regulations have on the economy, could the clampdown have a chilling effect, and further freeze a still floundering economy? It is also a problem when individual firms use government regulations as a tool to harm their competitors. Will any of these many flaws be addressed in the next Congress? Stay tuned.
This post originally appeared in Out of the Storm News.