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CaptainHarley's avatar

What are the implications of the new financial legislation for well-run companies such as this one?

Asked by CaptainHarley (22384 points ) April 23rd, 2010

I just got this email from my insurance carrier. I have been with them since 1967 and they are the very best I have ever seen. Is this another example of well-intentioned governmental interferrence gone ary??

“Rarely in our 87-year history have we turned to USAA members to weigh in with elected representatives on an issue of great importance. But, we are now.

“The U.S. Senate currently is considering legislation (S.3217) that would impose new rules on the nation’s financial services industry, including USAA.

“As the leading provider of financial services to America’s military community, USAA supports financial services reform.

“However, the current Senate bill would disproportionally impact USAA because we are a unique and fully integrated association. USAA is not like the banks and other companies that helped bring down our economy, and we never took a penny of TARP funds. We do not engage in the harmful practices this legislation seeks to resolve.

“If unchanged, the bill would:

“Prevent USAA from managing the association’s portfolio as we have for the past 87 years.
“Jeopardize our ability to continue offering many of our competitive products.
“Limit our ability to return money to our members. Last year, USAA returned $1.2 billion to our members in the form of distributions, dividends, and bank rebates and rewards.*

“So, we are asking all USAA members and employees to urge their U.S. senators to amend a portion of the bill, known as the “Volcker Rule,” to eliminate its effect on a company like USAA. Please know that this legislation does not impact individual member’s investments.

“Regardless of the outcome of the legislation, USAA will remain a unique and enduring association that’s all about you — the military and their families.

“Please take action on this matter by immediately contacting your U.S. senator. You may click here to access a special website that will enable you to quickly send an e-mail message to your senator.

“Thank you for your help and support,

“Josue (Joe) Robles Jr.
“Major General, USA (Ret.)
“President and CEO”

Observing members: 0 Composing members: 0

11 Answers

wundayatta's avatar

Creating legislation is a difficult process. When you write a piece of it, it is very difficult to anticipate all the possible impacts. That’s why lobbying is important. It informs legislators about things they did not know or anticipate. That’s why we have a process where various interests have an opportunity to testify about the legislation.

Our government isn’t just shooting with a shotgun. They want to be more precise than that. But sometimes the sight isn’t straight, and you miss the target slightly. That’s when you correct the sight. Hopefully you do it before the legislation is enacted, but sometimes it has to happen afterwards.

This is not some conspiracy by an out-of-control government. It’s a normal process. I’d love it if everyone who hates government tried to govern. They wouldn’t do anything any better and it would probably be worse because they are amateurs.

plethora's avatar

@wundayatta You have a most charitable view of this administration.

@CaptainHarley I’m not insured by USAA, but know they do a really great job for their customers. I’ll fax my Senator today. Thanks for sharing this and yes it is legistation gone awry, but hardly well intentioned.

jaytkay's avatar

Based on those quotes, it’s impossible to tell anything about the law. There’s not a single fact about the proposed regulations in there.

I wouldn’t call my Senator on their behalf if they aren’t willing to explain exactly what is wrong. And if they really don’t provide more details, I wouldn’t trust their motives.

I have no opinion on the Volcker Rule or USAA, I’m just commenting on the specific email.

stranger_in_a_strange_land's avatar

@CaptainHarley I’m also associated with USAA (since 1978) and have received the same letter. My father, grandfather and great-grandfather were also satisfied customers. I’ve also written both Senators of my State urging them to make an exception to the Volcker Rule in special cases like this. USAA is to the big insurance carriers like credit unions are to big commercial banks; but unlike credit unions they are forced to operate under the same rules as their commercially profit-driven big rivals.

Cruiser's avatar

I read the backbone summary of this proposed bill and again the entire bill is pretty enormous but it does seem to close up the holes and loop holes that allowed sloppy lending practices to occur that supposedly was part and parcel to the recent financial meltdown. Something has to be done to prevent that from occurring and IMO even good old pillars of the financial community like the USAA will have to participate in this need for corrective measures. Decide for yourself…

Here is a highlight summary of the bill by the Commercial Mortgage Securities Assn.
http://www.toughtimesforlenders.com/uploads/file/Updated%20CMSA%20summary%20of%20Senate%20Banking%20committee%27s%20financial%20reform%20bill%20March%2022,%202010.pdf

Here is the bill itself…
http://banking.senate.gov/public/_files/TheRestoringAmericanFinancialStabilityActof2010AYO10732_xml0.pdf

dpworkin's avatar

They are just getting socked in the pocket. They care about their bottom line, and not the well being of the economy if they don’t support financial reform.

Dr_Dredd's avatar

Agree with @jaytkay. That letter said a lot without really saying anything at all.

CaptainHarley's avatar

All I know is that this is one of the very few large organizations I trust. As I said, I’ve been with them since 1967, and have never had a single complaint against them. Perhaps the disparate impact to which they refer is because they are an insurance association? At any rate, they are run by former collegues of mine whom I trust. I’m going to send the letters out as they requested.

jaytkay's avatar

@CaptainHarley

I can see your point. It sounds like how I see my credit union. They do everything a bank does, except the credit union always offers better rates. When I bought a car with dealer financing, they phoned a couple weeks later asking to take over the loan at a substantial discount.

If they asked me to go to bat for them I’d be inclined to go ahead.

Dr_Dredd's avatar

I’d still want more information. For instance, How would the bill ‘jeopardize our ability to continue offering many of our competitive products’?

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