There is little doubt that some sort of financial regulation needs to occur in order to protect Americans from unscrupulous financial companies that helped cause the recession in 2008. There is mounting pressure for Congress to pass a financial reform bill that would add more regulations to the country’s investing and monetary systems. The “Volcker Rule,” as drafted in Section 619 of the Restoring American Financial Stability Act of 2010 (“the Senate bill”), gives regulators the discretion to limit and prohibit certain investment activities of financial services companies. But, the Senate bill as it is currently written would disproportionately impact USAA because it is a unique, member owned association.
The Problem. USAA is not like the banks and other financial companies that helped bring down the economy to its knees. USAA did not engage in the harmful practices that this legislation seeks to resolve. As the bill currently reads, it directs regulators to prohibit government insured depository institutions (banks) from engaging in “proprietary trading,” for its own account. However, the reach of the bill would extend beyond the bounds of just banks to its affiliates and subsidiaries. For insurers that own banks, like USAA, this very restrictive bill could mean that all of USAA’s own investment activity essential to the running of the insurance operations would be significantly limited to investing in only government backed securities. The result would be a very conservative company that would be limited in its investments which would not earn enough to keep the cost of insurance affordable for its members.
Why USAA Is Awesome. Okay, I may be a little biased here because I am a client. And, to have full disclosure, I have been a client of USAA’s for almost twelve years now. I recently counted up all the financial products my family has with the financial services company, and it equaled eight different products. My family uses USAA for our checking, savings, and money market accounts. We also invest in mutual funds through USAA and have our cars, home, and life insurance through the company as well. But, I have reason to love USAA. They are a great company! In fact, they are awesome! They never took one dime of the government’s money during the crash in 2008. They did not participate in ill-conceived TARP program. In fact, while the market was tanking, USAA was busy giving over $1.2 billion back to its members in the form of rebates, dividends, etc. That’s another reason why I love USAA. They are owned by their members. I receive a refund every year from insurance that they didn’t need which cuts my costs dramatically each year.
How You Can Help. USAA is facing a serious challenge due to financial services legislation, known as S.3217, a bill that is being considered by the U.S. Senate right now. The Senate is expected to conclude debate on S.3217 and amendments sometime next week. After that, the House of Representatives and Senate may convene to resolve differences in the chambers’ two financial reform bills. From there, a single bill will be sent to the president. U.S. senators, Senators Jeff Merkley and Carl Levin have introduced legislative language that would amend the Volcker Rule provision. The new language clarifies that the restrictions of the Volcker Rule should not adversely affect state-regulated insurance investments made by companies like USAA. That amendment will allow USAA to continue to serve their members like they presently do.
If you want USAA to continue to offer the services that we have come to love and depend on, please contact your U.S. Senators and urge them to support the new Merkley-Levin Amendment (#3931).
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