Insurance Capital Standards Clarification Act of 2014

Floor Speech

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Mr. BARR. Well, I thank the gentleman from Michigan for his leadership on title III of this package and the Mortgage Choice Act, and I appreciate the gentleman's yielding so that we can talk about why every Member of Congress should support this package of reforms.

Before I get to the substance, I do also want to thank the ranking member, thank her for voicing support for the underlying policies in this legislation. I want to thank her for expressing absolutely no concern about the substance of the policy in her remarks, and I would also like to thank the ranking member for her recognition that the Dodd-Frank law may very well have flaws, even for those who adamantly supported the passage of the bill, and for her acknowledgement that she would have no problem changing or dealing with some of the flaws of the Dodd-Frank law. Well, this is our chance, Mr. Speaker. This is the chance to deal with those flaws.

The legislation on the floor tonight is a package of four commonsense financial services bills that all share a common theme. They all have proven bipartisan support. They all have passed either the House or the Senate with unanimous or near-unanimous support, and, most importantly--put aside all of this procedure here--they all promote jobs.

They all promote durable economic growth in this country, and Members on both sides of the aisle and Members in both this Chamber and in the Senate agree about that. Let's stop the games in Washington, and let's get the American people back to work. That is what we have an opportunity to do here in a bipartisan way; so I call on my colleagues to support this bill.

This is a simple 14-page bill that is about fixing unintended consequences of the Dodd-Frank law. These fixes are technical corrections, and they are meant to clarify provisions in the law where, although congressional intent was clear, the authority provided by the statutory language led some regulators to enact or promulgate economically destructive regulations.

The four titles of this legislative package represent the hard work of a number of Members of Congress on both sides of the aisle. Let me just go through those really quickly. Title I of the legislation is an important provision that clarifies the capital requirements applied to insurance companies subject to Federal Reserve Board supervision.

Mr. Huizenga did a good job explaining what this title does; but, just in summary, it is important that the capital rules for insurance companies are carefully tailored to the business of insurance rather than arbitrarily holding insurance companies to standards that are meant for banks.

I want to thank Congressman Gary Miller, a Republican from California, Congresswoman Maloney, a Democrat from New York, for their leadership--bipartisan leadership--for this Insurance Capital Standards Clarification Act and for helping push this provision forward.

I would also like to further emphasize the bipartisan and noncontroversial nature of this title by noting that the Senate version of the Insurance Capital Standards Clarification Act passed the Senate by unanimous consent on June 3.

Then there is title II. Title II is the text of a bill that I introduced in March which passed the House by a voice vote. This was a bill that no one opposed. This was a bill that simply incorporates bipartisan provisions of the Restoring Proven Financing for American Employers Act, and it is about jobs.

It is about restoring a robust and dependable commercial lending market to U.S. companies so that they can obtain affordable financing to expand their businesses.

Collateralized loan obligations, known as CLOs, have proven to be a critical source of funding for U.S. businesses for over 20 years. Today's CLOs continue to provide $300 billion in financing to U.S. companies on Main Street, including companies that are well-known to all of us in this room: Dunkin' Donuts, American Airlines, Burger King, Toys R Us, Delta Airlines, Goodyear Tire, and even a mattress company in Lexington, Kentucky, my home district, Tempur Sealy.

Because of this innovative source of financing, U.S. employers have expanded, jobs have been created, and our economy has grown; and, despite a proven track record with a default rate below even a half a percent, this valuable form of corporate finance is under assault because of the Volcker rule.

Further relief from the Volcker rule for these CLOs is necessary to prevent a fire sale in the CLO market that will cause significant losses for banks of all size. This defined, narrow fix which clarifies that the Volcker rule should not be construed to require the divestiture of any debt securities of CLOs prior to July 21, 2017, if such CLOs were issued before January 31, 2014, is a commonsense solution.

It clarifies that a bank shall not be considered to have an ownership interest in a CLO if such debt security has no indicia of ownership other than the right to participate in the removal for cause in the selection of a replacement investment manager or investment adviser of the CLO.

This title is a bipartisan commonsense fix to a

real-world problem voiced by community banks and by companies on Main Street that want access to this affordable and reliable source of commercial credit. It prevents an unnecessary fire sale in the CLO market that would cause significant losses to banks currently holding these legacy CLOs, and it will help keep the cost of borrowing affordable in the future for Main Street U.S. businesses looking to expand, grow, and create much-needed jobs.

I want to personally thank Congresswoman Maloney and Ranking Member Waters for working with me to enact a CLO fix so that it could pass by a voice vote in April.

Then, also, title III, this is the fix that Congressman Huizenga helped pass, and Congressman Huizenga worked in a bipartisan way with Congressman Meeks to support this Mortgage Choice Act, and it passed the House by a voice vote--not a single objection--on June 19, and I won't go over the details which Congressman Huizenga has done well, but I will say that this measure will greatly advance our efforts to help the housing market and our economy recover as Members on both sides of the aisle have demonstrated with their support and supporting it by voice vote.

Finally, title IV, this is the fourth and final title of this package, and it is a provision that has broad support for Main Street and businesses of all sizes. Like other provisions of this package, title IV is meant to alleviate the unintended consequences created by Dodd-Frank. It is a technical fix that has proven bipartisan support and passed the House on June 12 with 411 votes in favor.

The provision simply clarifies and codifies congressional intent that Dodd-Frank was not supposed to impose margin requirements on end user derivative transactions. We are talking about nonfinancial companies that produce goods for the American people and simply use derivatives to hedge against commercial risk.

This provision is not about speculation. It is about promoting responsible risk-management practices among U.S. companies. In fact, failure to enact this provision could lead to more risk as companies may be deterred from engaging in hedging transactions.

It requires them to needlessly tie up capital that could otherwise be used to do more productive things like expand operating plants, perform research and product development, and ultimately create jobs. Again, this is a provision that previously passed the House with near unanimous support.

In conclusion, Mr. Speaker, what do we have here today? We have a package of four bills, 14 pages, unlike the 2,300 pages in Dodd-Frank--14 pages, each of which of these four bills--overwhelmingly bipartisan--each of which are vital to preserving and creating jobs, each of which are noncontroversial in nature, and two of these provisions previously passed the House by voice vote, a third passed with 411 votes, and the fourth is a commonsense critically important solution for the 75 million American families that rely on life insurance for financial and retirement security, a bill that passed the Senate by unanimous consent.

The substance and the policy behind these bills are bipartisan. It is solid. I would certainly expect that, if you would support the underlying policy, then you would support this commonsense package of bills to promote jobs and durable economic growth.

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