WASHINGTON - Legislation is likely to be introduced this week that would strip deposit insurance from the controversial Retirement CD.
Rep. John D. Dingell is already pushing legislation in the House that would apply state laws and regulations to bank insurance activities.
The Michigan Democrat introduced the Insurance Sales and Underwriting Consumer Protection Act of 1994 on Sept. 22. Rep. Cardiss Collins, D-Ill., joined Rep. Dingell on the bill.
The insurance industry has been lobbying fiercely for legislation to thwart the Retirement CD, a tax-deferred, federally insured deposit account.
Regulators approved the new annuity-like product in May for a tiny bank in Browning, Mont. Blackfeet National Bank has had hundreds of inquiries from customers looking for an insured annuity-like product that is insured by the government.
Rep. Dingell sent angry letters to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. asking that they withdraw the Blackfeet approvals. Rep. Dingell said the Retirement CD amounted to insurance underwriting - a power barred to banks.
"I find it incredible that the Comptroller and FDIC can so casually try to grant such new and unprecedented powers to banks," Rep. Dingell said.
Four senators, including Sen. Christopher Dodd, D-Conn., followed up with a letter to regulators in June. They promised legislation "to prohibit the sale of this investment product."
Regulators contend that the Retirement CD, while posing certain consumer disclosure questions, does not expand bank powers. A number of banks have expressed interest in selling the CD but are holding off until these legal questions are cleared up.
With Congress set to adjourn for the year in a couple weeks, it is unlikely that any bill will pass either chamber this year. But both bills are expected to be resurrected in the 104th Congress.