The Trump administration today gave life insurers two big, but temporary, victories against the Dodd-Frank Act.
President Donald Trump sent Treasury Secretary Steven Mnuchin two memos about the act.
(Related: Trump Issues Dodd-Frank Executive Order)
One memo calls for Mnuchin to spend 180 days reviewing the Financial Stability Oversight Council process for deciding whether an insurance company or other nonbank financial company is a "systemically important financial institution," or an organization so critical that serious problems with it could hurt the U.S. economy. The memo includes an order for Mnuchin to determine whether the SIFI designation is transparent enough and gives insurers and other entities meaningful access to a timely, transparent appeals process.
Trump told Mnuchin and FSOC not to name any new SIFIs while the review of the designation process is under way.
The other memo calls for Mnuchin to spend 180 days looking at the Orderly Liquidation Authority and the Orderly Liquidation Fund. The OLA is the mechanism the government is supposed to use to resolve serious problems at SIFIs. The Orderly Liquidation Fund is the fund the U.S. Treasury Department is supposed to use to pay for an orderly liquidation of a SIFI.
Trump told Mnuchin to use the OLA mechanism only in a significant emergency, and only after consulting with the White House.
Trump also announced an executive order calling for Mnuchin and the Treasury Department to review all significant tax regulations issued since the beginning of 2016, in an effort to identify and reduce tax regulatory burdens.
Dirk Kempthorne, president of the American Council of Life Insurers, put out a statement welcoming the two new memos to Mnuchin.
"This is a move in the right designation, as the current designation of financial institutions as systemically important is fatally flawed," Kempthorne said in the statement. "We believe the end-result of this review should be for the Treasury Department to recommend the rescission of the authority of the Financial Stability Oversight Council to designate life insurers as systemically important."
The SIFI designation process has had a direct effect on many agents and brokers in the life and annuity markets, by pushing MetLife Inc. to spin off its life and annuity business as a separate entity, Brighthouse Financial.
Capitol (Photo: Thinkstock)
Congress passed the Dodd-Frank Act in 2010, in response to the financial crisis that started in 2007. Drafters included the SIFI designation system, the mechanism for liquidating troubled SIFIs, and the SIFI liquidation fund in the act in an effort to keep the collapse of any large financial services company from causing a similar financial crisis in the future.