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From Banking and Finance Law Daily, July 18, 2014

Senate passage of TRIA reauthorization includes community bank representation on Fed Board

By J. Preston Carter, J.D., LL.M.

The Terrorist Risk Insurance Act (TRIA) reauthorization passed by the Senate includes Sen. David Vitter’s (R-La) amendment that would require the Federal Reserve Board of Governors to have at least one member with community bank or community bank supervision experience. The measure also included an amendment allowing insurance brokers to more easily register across state lines. The TRIA reauthorization (S. 2244) passed by a vote of 93-4 on July 17, 2014.

Vitter called the vote a “win for our community bankers, and those fighting against bailouts and too-big-to-fail banks, across the country who have had their voice get drowned out by Wall Street and academics in recent years.” Vitter first introduced the bipartisan “Community Bank Preservation Act of 2014” on April 10, 2014 (see Banking and Finance Law DailyApril 11, 2014).

Earlier in the week, Vitter had lobbied for his amendment, saying “The Fed’s role in bank supervision has greatly expanded, but Fed membership has dramatically shifted away from community bank experience and toward academic and economist experience. Community banks have been getting the short end of the stick in the financial sector and it’s only gotten worse since the financial crisis and megabank bailouts.” (see Banking and Finance Law DailyJuly 15, 2014).

Senate Banking Committee Member Heidi Heitkamp (D-ND) praised the legislation because “it is critically important for someone to stand up for community banks when the Federal Reserve makes its consequential decisions.”

Industry response. The Independent Community Bankers of America applauded the Senate for including Vitter’s amendment in the TRIA. “Community bankers have a unique understanding of how to promote healthy and vibrant local economies and should continue to have a clear voice on the Federal Reserve Board,” said John H. Buhrmaster, ICBA Chairman. “Because community bankers can bring this valuable expertise and perspective to the table, having a community banker on the Fed board is in the interest of the agency, the economy, and the American people.”

Prior to the vote the organization sent a letter to the Senate urging its members to approve the Vitter amendment.

The American Bankers Association voiced its approval for the vote, stating that Vitter’s amendment “will help ensure the Fed has governors with strong, practical banking experience and expertise.

Banking Committee leaders applaud TRIA reauthorization. Created in 2002, in the wake of the terrorist attacks of 9/11, TRIA provides a federal backstop for insurance coverage against losses from devastating terrorist attacks. This insurance is crucial to spurring new development and protecting existing real estate in all areas of the country. TRIA has been reauthorized in 2005 and in 2007. The legislation was set to expire at the end of this year, but the bill would extend it until the end of 2021.

“I am pleased that my colleagues on both sides of the aisle in the Senate came together today to pass this critical, bipartisan reauthorization, which passed out of the Banking Committee unanimously,” said Senate Banking Committee Chairman Tim Johnson (D-SD). “This long-term, seven year extension of TRIA promotes national security, economic growth, market certainty, and job creation across the country all while protecting the taxpayer.”

“Getting terrorism risk insurance right is important in order to protect taxpayers and to limit the economic and physical impact of any future terrorist attack on the U.S.,” Ranking Member Crapo (R-Idaho) said.

Industry response to TRIA reauthorization. The Financial Services Roundtable approved the vote, stating that “The Senate legislation establishes a public-private partnership that enables the private sector to offer terrorism risk insurance and absorb substantial property and casualty losses after acts of terrorism.”

The Mortgage Bankers Association commended the Senate for passing the reauthorization, stating that TRIA “has been extremely successful in its mission to provide affordable coverage to a broad segment of the commercial and multifamily finance industry, all while ensuring private capital—not taxpayer dollars—remain in a position to absorb the brunt of the costs should the worst occur."

The U.S. Chamber of Commerce stated that the “Senate bill continues to promote the long-term availability of terrorism risk insurance for catastrophic terror events and provides a standard of stability for financial markets and recovery in the event of an attack.”

Insurance broker amendment. The TRIA reauthorization measure also included an amendment by Jon Tester (D-Mont) and Mike Johanns (R-Neb) that would create a non-profit membership organization, the National Association of Registered Agents and Brokers (NARAB), comprised of state insurance commissioners and insurance market representatives. After passing background checks in their home states, agents and brokers could apply for NARAB membership, allowing them to sell insurance in other states.

Companies: American Bankers Association; Financial Services Roundtable; Independent Community Bankers of America; Mortgage Bankers Association

MainStory: TopStory CommunityDevelopment FederalReserveSystem

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