Wider Insurance Powers Opposed
WASHINGTON - Democrats on the House Energy and Commerce Committee argued Thursday that the Bush administration's banking reform bill authorizes more insurance activities than banks can safely conduct.
"If banks can't handle the assets they have now, how are they going to handle insurance?" asked Rep. Cardiss Collins, D-Ill., chairwoman of the panel's subcommittee on commerce, consumer protection, and competitiveness.
Both Parties Unhappy
Both banking and insurance interests are dissatisfied with their treatment in the bill that passed the House Banking Committee last month, and both are looking to Energy and Commerce for help.
At a hearing Thursday, insurance interests got the more friendly reception, at least from the Democratic majority.
Rep. Collins and others warned that expanded bank insurance powers could lead to abuses, such as tied sales of loans and credit life insurance, and the sale of uninsured investment instruments to consumers who believed they were buying insured products.
But Assistant Treasury Secretary Jerome H. Powell said banks are already selling insurance in a number of states "with no evidence of problems.
Edward L. Yingling, chief lobbyist for the American Bankers Association, said the Treasury's banking proposals are good for consumers because increased competition would drive down the cost of insurance.
But insurance representatives argued that evidence available about insurance products banks can already sell indicates prices could rise. "Banks have consistently been shown to sell credit insurance at the highest possible rate," said Harry F. Custis, chairman of the National Association of Casualty and Surety Agents legislative committee.
Each Side Complains
Bankers believe they lost ground in the Banking Committee bill. It would forbid banks to affiliate directly with insurance companies and would eliminate some powers national banks now enjoy. It also tightens an exemption in current law that lets national banks market insurance in towns of fewer than 5,000 people.
Insurance agents complain that the Banking Committee bill contains an exemption that would let Citicorp and Chase Manhattan Corp. market insurance nationwide from Delaware.