Mr. Chairman and members of the Committee, my name is Jim Ericson. I am President and CEO of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin as well as Chairman of the Board of Directors of the American Council of Life Insurance (ACLI). Today I am appearing on behalf of the ACLI, the American Insurance Association, the Alliance of American Insurers, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies.
Together these associations represent more than 3,000 life insurance and property and casualty insurance companies which underwrite the overwhelming majority of life insurance, pension products, property/casualty insurance and liability insurance for individuals and businesses within the United States. We appreciate the opportunity to present the industry's views on financial services restructuring legislation.
Mr. Chairman, we appreciate your efforts to move financial modernization to the top of the priority list for action in this Congress. We believe this measure is long overdue and is essential if providers of financial services in this country are to retain their positions of prominence in the global market. We look forward to working with you and members of this Committee to develop modernization legislation meeting the needs of financial institutions, their regulators, and their customers.
For most of the last twenty years, as the various components of the financial services community have battled over financial modernization, previous chairmen of this Committee and its House counterpart implored the different segments of the industry -- banks, insurers, and securities dealers -- to put aside our parochial differences and seek common ground. The goal then, as now, was to produce a fair compromise which would allow broadened competitive opportunities for all and adequate protection for consumers and institutions through appropriate regulation.
Last year, building on the foundation produced on a bi-partisan basis by the House, the principal trade groups representing insurance companies and agents, banks, and securities firms joined in a historic agreement to support a legislative package reported from this Committee, together with consensus provisions that were to have been part of a Manager's Amendment for the Senate floor.
Time ran out on that attempt to bring H.R. 10 to the President's desk. However, the agreement between the affected industries embodied in that proposal remains intact. With some exceptions, the exact language of that agreement need not be viewed as the only way to accomplish necessary reforms. However, most of the concepts contained in the agreement are critical to attracting the broad industry support necessary to achieve enactment.
It is for this reason that we viewed with alarm the discussion draft recently circulated by the Committee. This was a first cut which we believe clearly disregarded the legitimate interests of the insurance industry.
It is particularly troubling that virtually every provision sought by the insurance industry - language not objected to by any of the major financial service groups and overwhelmingly approved by this Committee just four months ago - was either eliminated or severely weakened in the original draft. As one of the principal proponents of financial modernization, we were extremely disappointed in the overall approach taken by the original staff draft.
However, on the basis of the discussions we have had since then with you and your staff, Mr. Chairman, and the assurances you have given us that our critical concerns will be dealt with satisfactorily in the upcoming Chairman's mark, we are hopeful that significant changes can be made and that the final product will be something we can support. Much of the comment that follows reflects concerns over issues that may be resolved in the mark. We retain them to underscore their importance to insurance companies.
The principal insurance provisions of last year's agreement were painstakingly developed over two years as legislation tortuously made its way through the 105th Congress. To describe this language as sensitive is a dramatic understatement. Almost every provision was the product of extensive debate among insurance companies, agents, regulators and bank representatives. For every provision that was agreed upon, dozens of others were considered and rejected. For that reason, departures from the insurance language of the agreement, no matter how seemingly minor or how well-intended, raise a substantial risk of upsetting the delicate balance achieved last year.
We understand that the Committee has to work its will on its own modernization package.
However, as you do, please to bear in mind that an agreement that has been sought for more than
twenty years is there for the taking. It would be a tragedy to lose sight of how much was
accomplished last year or to unravel the broad consensus which currently exists to move
Insurance Company Support for Financial Modernization Legislation
We sense some misconceptions regarding the degree to which insurance companies need financial modernization legislation and the reasons why they are supporting the measure. A clearer understanding of these matters will help put our comments on the staff draft and on modernization legislation in general in better perspective.
From the standpoint of affiliation powers, most insurance companies are not in need of modernization legislation at all. We have always been able to affiliate with securities firms and, since the late 1960s, have been able to control a single thrift institution if we wish a banking capability. For this reason, we see no utility in, and do not support, a bare-bones approach to financial services modernization that simply repeals statutes which prevent widespread affiliation between banks, securities firms and insurers.
Our primary motivation for supporting financial modernization legislation involves the issue of regulation. For a number of years, banks have dramatically expanded their insurance authority through a series of rather strained interpretations of existing law that have been sustained in the courts (largely, we note, with the aid of the doctrine of judicial deference addressed later in our statement). Often, these regulatory initiatives have raised important questions involving the extent to which state insurance laws and regulations may be preempted. This, in turn arguably affords banks a very different system of insurance regulation than the one to which we are subject. And that gives rise to the potential for competitive inequities.
Insurers view this legislation as a means of assuring that anyone engaging in the business of insurance is functionally regulated by the states in a manner that is fair and equitable to all. We are willing to have Congress open up to banks all aspects of our business so long as banks abide by the same rules and regulations that we do. This assures us (and banks) fair competition and the broadest possible business opportunities.
In light of the foregoing, we urge you to keep in mind that the failure to assure workable functional regulation or the creation of other significant competitive problems will quickly dampen the desire of insurance companies to support financial modernization legislation. However, there is considerable optimism that these problems can be resolved in the upcoming Chairman's mark.
There are several critical provisions for life and property/casualty insurers which must be
contained in any modernization legislation which is to have the support of our industry. All of
the following provisions were part of last year's agreement.
Functional Regulation of Insurance by the States
Equal and uniform regulation of identical activities conducted by different types of financial institutions is the best guarantor of competitive equality. How the business of insurance is regulated should not depend upon whether or not the entity conducting that activity is affiliated with a depository institution. The original staff draft misses the mark on functional regulation in one key respect: without a definition of insurance (see below), the promise of functional regulation is largely empty.
In addition, achieving functional regulation of insurance by the states in this proposal should be
buttressed through a restatement of the McCarran-Ferguson Act as the law of the land. The
Committee draft is deficient on this point, and we strongly recommend this omission be rectified
with an appropriate provision.
Definition of Insurance
As perhaps the centerpiece of insurance industry support for legislation, the insurance definition is necessary, not to deny insurance activities to banks, but to make clear what the dividing line is between insurance and other financial activities for regulatory purposes. One of the main concerns of insurers has been the propensity of some federal banking regulators to characterize virtually anything a bank does as "part of or incidental to banking," and, thus, arguably beyond the full jurisdiction of insurance regulators. Over the years, we have seen core insurance products like fixed annuities, variable annuities, financial guaranty insurance, municipal bond guaranty insurance, mortgage guaranty reinsurance, insurance, title insurance and so on, all labeled as part of or incidental to banking. It is likely that in the near future homeowners and auto coverage in connection with financing will be deemed incidental to banking.
For that reason, it is not sufficient for legislation to simply mandate "functional" regulation of insurance. Without a definition, a particular product could be determined to be "insurance" when provided by an insurer, but "banking" when provided by a bank. As applied to national banks, the question then becomes, "What authority do state insurance regulators have over the banking activities of these federal institutions?"
In addition to determining which products or activities are to be regulated as insurance, a definition is critical is determining where in a banking enterprise activities such as insurance underwriting are to be conducted. If insurance underwriting is to be conducted only in holding company subsidiaries (as we believe must be the case), lack of a definition opens the door for assertions that a particular product is not insurance and can therefore be underwritten either in a bank or in a subsidiary of a bank.
The definition of insurance included as part of the agreements passed by this Committee last year was developed over a two year period through a cooperative effort by banking and insurance interests. It then had continues to have the support of these interests. Importantly, it addresses the principal concern that some have with definitions, which is that they may become quickly outmoded as new products are developed and enter the marketplace.
In addition to removing the known universe of banking and insurance products from controversy, the definition, while citing many typical insurance products, essentially ties the status of future products to the federal tax code as administered by the Internal Revenue Service. The definition does not attempt to establish a rigid set of product features or characteristics for either insurance or banking. Rather, it says quite simply that if: (1) the product is defined and regulated as insurance by the states, (2) is not a bank product, and (3) is entitled to insurance tax treatment under the Internal Revenue Code, it falls within the definition of insurance. Tying the definition of new products to the tax code eliminates concerns on the part of many bankers that state insurance regulators will inappropriately attempt to sweep legitimate banking products under their jurisdiction. This definition will reduce jurisdictional disputes and will prevent the development of two separate regulatory schemes - one for insurers affiliated with banks and another for insurers not affiliated with banks.
The original staff draft omits the insurance definition that is crucial to all insurance groups. Once
restored, one of the major obstacles to insurer support of the bill will be eliminated.
Equally important is the need for a mechanism to quickly and fairly resolve disputes that may arise between federal bank regulators and state insurance regulators over the classification of new products. Owing to the flexibility built into the definition of insurance described above, there remains a possibility that regulators may still differ on these classifications. When this occurs, the interpretations of relevant regulators are entitled to equal weight so that these important issues are decided fairly on their merits and not arbitrarily by a doctrine like judicial deference, which was devised to deal with crowded court dockets and to reflect the specialized knowledge of the relevant regulator. However, the blurring of lines between financial services providers has required respective regulators to expand their knowledge in order to better protect consumers. Hence, no single regulator can claim preeminence in dealing with the modern financial services marketplace. All perspectives are necessary, so no deference is called for.
The staff draft is conceptually consistent with our views on this point, although it does reflect a
new approach to the matter. However, the previous language, "no unequal deference" was a
result of a consensus reflecting a concern that current case law favors a decision by a federal
regulator. We have concerns that, from a technical standpoint, the draft may not work as
intended, and we are discussing our concerns with Committee staff.
Bank Operating Subsidiaries and Insurance Underwriting
Insurance companies support affiliations with banks so long as the solvency of insurers is safeguarded and so long as the structure chosen for affiliations does not give rise to any inappropriate competitive advantages. We firmly believe that requiring banking organizations to underwrite insurance exclusively in subsidiaries of their holding companies rather than in bank operating subsidiaries is the only way to assure these fundamental principles of solvency and competitive fairness.
Developing an appropriate structure for banks to control insurance underwriters must take into
account two aspects of banks and their regulation that is unique relative to any other corporate
enterprise: banks' entitlement to the federal safety net; and the overarching requirements of
banking regulation that the resources of bank holding companies and the non-banking
subsidiaries of banks must be available to backstop the safety and soundness of the insured
institution. The former gives rise to competitive concerns and the latter to concerns over insurer
The Net Subsidy Controversy
For years the debate has raged over whether federal deposit insurance affords banks a net subsidy - that is, whether the safety net gives banks a lower cost of capital than any other type of financial intermediary. The Federal Reserve says it does. Treasury says it does not. Many bankers advise us privately that it does. Others equivocate. Given this state of affairs, we believe Congress must acknowledge at least the possibility of such a net subsidy and craft modernization legislation accordingly.
Assuming for sake of argument that banks' cost of capital is cheaper due to the federal safety net,
why is this important to insurers and why does the location of a bank's insurance underwriting
operation make such a difference to us?
First, insurance underwriting is an extremely capital-intensive business. Even modest growth of an insurer requires significant capital as acquisition expenses must be expensed under statutory accounting principles, and as insurance liabilities are booked and appropriate insurance reserves established. In a high volume, low margin, business like insurance underwriting, even a few basis points of advantage in the cost of capital translates into a significant competitive edge in the marketplace.
Insurance companies, like banks, are quite familiar with the relative pros and cons of structuring
operations upstream at the holding company level or downstream in a subsidiary. While insurers
generally prefer to locate significant non-insurance operations at the holding company level to
alleviate risk-based capital requirements of state insurance law and quantitative investment
limitations, smaller operations may be more economical in downstream subsidiaries for two
reasons; if the noninsurance business needs capital, dividending capital from the insurer up to the
holding company to then be invested in the noninsurance operation may be a taxable event, while
making a capital contribution directly to a downstream subsidiary is not; and there are significant
limitations on the authority of an insurer to dividend capital up while such limitations do not
exist for direct investments in a subsidiary. Similar factors apply to banks. Thus, if a bank has
subsidized, low-cost capital due to the safety net, the bank can more fully deploy that capital
advantage downstream in an operating subsidiary than it can upstream to the holding company.
We believe it is incumbent upon Congress to limit to the extent reasonably possible the use of
any subsidized capital attributable to the safety net of banking operations. We believe this
requires locating insurance underwriting at the bank holding company level and not in operating
To date, the discussion of whether to permit risky activities such as insurance underwriting to be conducted in bank operating subsidiaries has focused almost entirely on the issue of bank safety and soundness. Can adequate firewalls be erected to protect the bank and its depositors from the risks of the non-bank subsidiary? Thus we see 100% "capital haircut" and other provisions governing operating subsidiary authority and hear impassioned arguments that the bank will be safe under this new structure. These are obviously important considerations, but they represent only half the equation in the context of financial modernization. If banks, insurers and securities firms are to combine, the regulatory structure must protect the financial integrity of each type of firm and their respective customers, not just banks and their depositors.
With respect to insurer solvency, the operating subsidiary concept comes up short in several
respects. For bank regulatory and safety and soundness purposes, banks and their operating
subsidiaries are considered as an integrated whole. Even a cursory glance at the Comptroller's
new operating subsidiary rules adopted in 1996 substantiates this point. If the bank experiences
financial difficulty, its regulator can require capital from the subsidiary to be channeled up to the
bank. Least-cost-resolution and other regulatory mandates may require federal banking
regulators to take such actions notwithstanding the adverse effects on the solvency of the
subsidiary. If the subsidiary is an insurance company, such action could be required over the
objections of state insurance regulators and could ultimately impair the ability of the insurer to
meet its contractual obligations to policyholders. It could severely impair the competitive
position of the insurer due to lowered ratings by entities such as A.M. Best. In the extreme, it
could force the insurer into receivership and trigger action by the state insurance guaranty
State insurance guaranty funds are the insurance industry's analog to federal deposit insurance funds. Unlike the federal funds, the state-based guaranty system typically is not prefunded. The state guaranty system is activated only after an insurer has failed, and competing insurers must then make out-of-pocket expenditures to satisfy the states' policyholder guaranty coverage limits. It is highly inappropriate to force insurance guaranty funds, and thereby the insurance industry and its policyholders, to backstop failing banks and their depositors. That must be exclusively the function of the federal deposit insurance system.
In the solvency context, we are further troubled that 100% capital haircut may create a significant disincentive for banks to maintain appropriate capital levels in subsidiary insurance companies. If every dollar of capital moving from the bank down to its insurance subsidiary is subject to the 100% haircut, and if the firewalls insulating the bank from the liabilities of the insurer are impregnable (as they appear to be), banks may be inclined to cease making needed capital contributions to the insurer, particularly if capital is in short supply for both the bank and the insurer. The bank may conclude that the best course of action is simply to let the insurer drop below its minimum capital requirements and let the state regulators (and insurance companies through the state guaranty mechanism) deal with the problem. After all, the bank's total investment in the insurer has already been written off and none of the insurer's liabilities can migrate back up to the bank.
Of course, the alternative of positioning an insurance underwriter as a subsidiary of a bank
holding company, that is, an affiliate of the bank, avoids the capital haircut and the resulting
disincentive to move capital downstream. By contrast, insurance companies simply cannot
support an operating subsidiary structure that carries with it a disincentive to keep insurers well
We fully appreciate banks' desire to have the flexibility to structure their operations in the manner they deem most appropriate. However, we do not for a moment believe that banks' desire for flexibility and choice can be put ahead of the need to protect insurer solvency and policyholders and to guard against inappropriate capitalization advantages.
We also recognize the Committee's desire to come up with a legislative package that resolves the
conflict between the Federal Reserve and Treasury on this point. Since we would like to see
financial modernization legislation advance, we share the concern. As the Committee works to
resolve this issue, we urge that whatever structure is chosen permits insurance underwriting only
through holding company subsidiaries, that is, affiliates rather than direct subsidiaries of the
bank. Alternatives have been proposed that are consistent with that view, and we would be
supportive of any of them.
Recently Demutualized Insurers
The broad preemptive sweep of Section 104 of the staff draft and other versions of this legislation creates a serious problem from mutual insurance companies that recently have, or plan to, demutualize. State insurance laws restrict a change in ownership of a mutual company that has recently demutualized. Typically, recently demutualized companies can change control during a three-to-five-year period after becoming public only with the permission of the regulator of the insurer's domiciliary state. The purpose of these laws is to afford companies a period of time to adjust to being publicly held before they are subject to takeover. Identical provisions are contained in federal banking law to accommodate federal mutual savings banks that demutualize.
These laws are essential to maintain the stability of recently demutualized companies. This is a
critical provision from our perspective especially given the fact that a number of large and small
insurers have recently demutualized or are planning or in the process of doing so. Language
enabling the states to limit change of ownership in this context for a period of three years was
agreed to last year and remains critical for our support of a bill.
Mutual Company Redomestication
This provision affords mutual insurance companies the ability to reorganize in a form that permits them to raise capital through the sale of stock and thereby remain competitive in the emerging diversified financial marketplace. Such language is highly desirable. In substance, this language permits mutual insurers to redomesticate to states in which the formation of mutual holding companies is permitted.
The organizational structure of mutual insurers places them at a significant disadvantage in affiliating with banks. Mutual insurers need the flexibility of the traditional holding company structure in order to affiliate effectively. Without a holding company structure, all affiliations must be held as downstream subsidiaries subject to state quantitative and risk based capital limits and statutory accounting rules. Restructuring banks and insurers as affiliates of a holding company is the traditional way to respond to these issues.
Bottom line, mutuals believe that the only way they can effectively affiliate is at the holding company level. And there are only two ways to do that. One is to fully demutualize and become a company driven by the financial markets. But for a mutual insurer that wants to remain a mutual, the only way to operate as a holding company is to reorganize as a mutual holding company.
The problem here, and the reason that redomestication language has been in most versions of
financial modernization legislation, is that not all states have mutual holding company laws. The
redomestication provision does nothing more than enable an insurer to change its state of
domicile from a state without a mutual holding company law to a state with a mutual holding
company law. This is an important competitive issue for some mutuals.
Definition of Financial in Nature
Section 102 of the staff draft appropriately defines insurance activities to be "financial in nature." However, that definition is qualified by new language providing that states shall not regulate in a way that would "disadvantage" a bank or its affiliates, agents or employees. We believe this qualifying language is inappropriate.
Qualifying the definition in this manner suggests that particular insurance activities may or may not be financial in nature depending on whether banks are disadvantaged by some aspect of state regulation. This is an odd and impractical result that would not appear to benefit either insurers or banks. We all need as much certainty as possible regarding whether an affiliation transaction is permissible under this new law. Tying a definition central to the legality of these transactions to the behavior of one or more states is not helpful.
More importantly, the language in Section 102 is inconsistent with the Barnett case. Barnett established a standard by which states are prohibited from imposing certain insurance regulatory requirements on banks. Whatever Barnett means, preempting state regulation that would "disadvantage an insured depository institution or any affiliate, agent, or employee" goes far beyond the standard articulated by the Supreme Court in that case. There could be no reasonable certainty by a state regulator that any insurance law or regulation would pass muster, for somewhere there might be a bank that concluded that one of its employees was "disadvantaged" by the regulator's action.
There are some in our industry that have serious objections with the preemption test set forth in Section 104(b) that attempts to prevent states from enacting laws that discriminate against banks. They are concerned that the current draft language would permit a state insurance regulation to be deemed discriminatory and be preempted by federal law if the practical effect were to discriminate, even if the regulation is completely neutral in its application and the state regulator has no intention whatsoever of discriminating against banks. Our colleagues will be discussing this section further with the Committee.
In our view, the inclusion of language inconsistent with Barnett goes beyond the current law of the land and would afford banks an inappropriate advantage in challenging the legitimacy of state regulatory action, thus upsetting the principle of functional regulation which the legislation seeks to achieve.
In sum we strongly object to the concept and substance of the "disadvantage" language in Section
102 and urge that it be deleted.
Facilitating Insurers Affiliations
Language agreed to last year would have facilitated the ability of insurers, particularly those organized in mutual form, to affiliate with depository institutions. The language has three components. The first makes clear that state law can not interfere with the ability of both stock and mutual insurers and mutual insurance holding companies to become bank holding companies. The second makes clear that state laws may not unreasonably limit insurers' investments in the voting securities of depository institutions. And the third provides that only an insurer's state of domicile may approve or disapprove a reorganization under which a mutual insurer becomes a stock insurer, whether as a direct or indirect subsidiary of a mutual holding company or otherwise.
In the context of legislation that would permit cross-industry affiliations, this language is particularly critical to mutual insurers. These companies may be able to affiliate only on a downstream basis if their state of domicile does not permit mutual holding companies. Additionally, this language facilitates the ability of mutual insurers to reorganize into stock form or mutual holding form and the thus take advantage of the opportunities afforded by modernization legislation.
There are several other insurance issues which must be addressed and can be done so without
disturbing the underlying support for legislation. Some of these changes are technical in nature or
are intended to provide added flexibility for insurance companies and their regulators to operate
in an integrated financial services environment.
Role of State Regulators in Insurer Changes of Control
One of the fundamental responsibilities of state insurance regulators is to assess transactions under which control of an insurer will change and to determine whether the transaction is in the best interests of policyholders. As we worked with the last Congress on financial modernization legislation, it became clear that the preemptive language of Section 104 virtually eliminated the states' ability to deal with policyholder interests where a depository institution proposed to acquire control of an insurer. The preemptive language in the bills provided that the states could not "prevent or restrict" such affiliations but made no allowance for their traditional role in protecting policyholders.
We agree with state insurance regulators that their ability to protect policyholders has been
severely compromised in many of these legislative proposals, and we urge the Committee to be
receptive to the suggestions of state regulators on how this issue should be resolved.
The insurance consumer protections set forth in Section 201 of the staff draft require federal
banking agencies to promulgate regulations addressing, among other things, insurance sales
practices (proposed new Section 45(b) of the FDIA). While we generally defer to insurance
agent groups on the legislation's treatment of insurance sales matters, we do register strong
objection to the reference in this language to Section 106 of the Bank Holding Company Act.
We believe this reference has the unintended effect of preempting state anti-rebate and anti-inducement laws for bank-related sales of insurance products bundled with deposit products.
Such laws constitute important consumer protection, designed to ensure that the decision to
purchase complex insurance products is made on the merits of the insurance product rather than
the enticement of discounts or product packaging. They were fashioned over the years to address
instances of abuse and their enforcement has served to protect the insurance consumer. In
addition to inadequate consumer safeguard, this discrepancy creates a severe competitive
imbalance for sellers of insurance not affiliated with banks who must comply with state laws in
all jurisdictions prohibiting sellers of insurance from inducing the purchase of insurance by offers
unrelated to the merits of the insurance itself. This reference to Section 106 should be removed
from the bill.
Downstream Investments of Insurers
Section (k)(4)(I)(iv) of new Section 4 of the Bank Holding Company Act is an important aspect
of the staff draft from the standpoint of the ACLI membership. It recognizes that insurers may
affiliate with depository institutions as part of a financial holding company and at the same time
retain their downstream portfolio investments made in the ordinary course of business and in
accordance with applicable state insurance investment laws. The debt and equity portfolio
investments of insurance companies are diverse, and often as not consist of securities of
industrial, nonfinancial, entities. In some cases, these investments represent controlling interests.
In drafting the legislation, it was recognized that it would be both impractical and pointless to
require insurers wishing to affiliate with banks to limit or dispose of their traditional commercial
Unfortunately, the draft adds a further limitation that, in our opinion, is both problematic and unnecessary. That limitation provides that the financial holding company may not directly or indirectly participate in day-to-day management of a company (i.e., an insurer's portfolio investment in a company in which the insurer has a controlling interest) except insofar as is necessary to achieve the objectives of this provision of the bill. By use of the word "indirectly," the limitation on active management applies to the insurance company itself (as it would as well if the insurer itself were the bank holding company).
State investment laws do not prohibit insurers from having controlling interests in nonfinancial, commercial firms. Those laws do, however, severely constrain the size of such investments. For example, the investment laws in many states limit an insurer's investment in downstream insurance subsidiaries to a small percentage of the insurer's assets, and all states further limit investments in non-insurance subsidiaries. Moreover, the current standards in all states for valuing investments in subsidiaries operates to impose risk-based capital constraints that are usually more limiting than quantitative investment provisions.
The net result is that insurers' commercial portfolio investments made in the ordinary course of
business are subject to state investment and risk-based capital constraints and are not large
enough to warrant the further limitation on active management. Indeed, preventing active
management is not in the best interests of insurance policyholders because it may diminish the
performance of the portfolio and consequently the economic benefits to policyholders. For these
reasons, we urge that the language on day-to-day management be deleted from the bill in this
Insurance companies remain committed to working with Congress to fashion financial services modernization legislation that addresses fairly the needs and circumstances of all financial service firms, their customers, and their regulators. We believe the insurance provisions worked out with the banking industry last year embody the balance that is necessary to pass legislation affecting the competitive balance among competing industries. While we are not rigidly wedded to the exact language agreed to last year, we again caution that significant departures from that language or its principles risk alienating major segments of the financial services industry whose support is necessary for a bill's passage.
We are concerned that the enthusiasm of insurers for financial modernization may be waning as
they begin to doubt that Congress will come up with a fair and balanced bill at the present time.
We think it would be unfortunate to let the momentum built up over the last two years ebb in the
interests of simplifying what is, in fact, an extremely complex facelift of the laws governing an
integrated financial service industry. We urge this Committee to prove the skeptics wrong, and
we remain committed to working with you toward that end.
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