Baker
statement on post-attack operations of the securities and insurance
industries
Wednesday,
September 26, 2001
WASHINGTON -- U.S. Rep. Richard H. Baker,
R-Baton Rouge, chairman of the House subcommittee on Capital Markets,
Insurance, and Government-Sponsored Enterprises, gave the following
opening statement today at a Financial Services committee hearing on
"Operations of the securities and insurance industries in the aftermath
of the September 11th attack":
Thank you, Mr. Chairman. I want to
thank all of our witnesses for appearing before Congress at a time when
they no doubt must attend to incomparably pressing matters.
The World Trade Center attack was a demonic
assault on thousands of innocent people but also an act of intolerance,
fear, and hatred to vanquish the uncontainable vibrancy of private
enterprise and the freedom represented in America’s financial system.
The professionalism, determination, and integrity demonstrated in the
days that followed by the very witnesses appearing here today, however,
have sent the clearest signal that the terrorists failed.
In fact, since September 11th
the heroic and even selfless acts of private enterprise have shown more
clearly than at any time before the inherent goodness and rightness of
the "free" in our free-market society. I daresay they also serve as an
inspirational reminder to lawmakers that, more than any well-intentioned
assistance we might devise, it is the resiliency and spirit of private
enterprise that has made our country prosperous and great and will lead
us out of our current difficulties.
I want to share briefly with the committee
a few anecdotal items following the destruction of the World Trade
Center as examples of what I mean:
- Verizon and Con Edison’s inexhaustible
efforts to rebuild communication and power connections to assist in
rescue and recovery at "ground zero" and to assure the smooth and
timely reopening of markets;
- Paine Webber providing employees of
Lehman Brothers, its competitor, office space;
- The NYSE’s allowing the use of trading
platforms by the American Stock Exchange and all revenues generated
using NYSE equipment;
- NY Life Foundation’s contribution of $4
million to relief efforts, on top of that and countless other
insurance companies’ swift payment of claims.
I point out these actions to illustrate the
resourcefulness and resolve of the American entrepreneurial spirit under
adversity. But moreover, it’s to caution fellow members of our busybody
Congress against imposing additional rules and restrictions at the
precise time when our capital markets are in direst need of expanded
freedom to recuperate.
Instead, perhaps we can make it our goal to
show the same level of federal restraint and flexibility within the
public-private partnership that helped bring the markets back open.
Sometimes the most meaningful contribution we in the legislature can
make is to get out of the way. And this is truly one of those times to
support the efforts of the executive branch to use existing government
resources and facilities that encourage the private sector to do what it
does so well and what it alone knows how to do – getting America
working, investing, risk-taking and growing again.
I know I don’t need to remind the SEC that
along with protecting investors, its second mission is promoting and
facilitating capital formation. We also know that much talk is
circulating over the need to regain consumer and investor confidence and
how best to provide stimulus for a stalling economy. To that end, if
there’s anything I would ask of you today, Mr. Pitt, it is this. That
you continue working to assist the executive branch through the powers
currently at your disposal and advice about those you deem might be
useful to eliminate all unnecessary federal burdens that limit capital
formation.
Specifically, while tax policy may not be
in your purview, I would like to ask you, as someone with a unique
perspective on what's ailing and what may help the capital markets right
now, to give studied thought (and a response to me at a later time) to
what might be the impact of withholding long-term capital gains taxation
on any investment made prior to the end of this year and held for at
least 18 months. In my view now is the time to review every known method
to stimulate economic recovery and not just concentrate on how to
respond to losses.
With regard to the insurance industry’s
commendable response to the tragic events on September 11th,
today’s testimony and all of the reports I have seen indicate the
insurance industry is in a good position to deal with the tremendous
losses, estimated as high as $70 billion, associated with these
events.
While we are not here today to discuss any
particular legislative or policy agenda, there has already been much
talk in the press of how the insurance industry will react to the new
underwriting environment. These discussions have ranged from opening the
Fed discount window to insurers to establishing the federal government
as the insurer of last resort with regard to terrorist activity. At this
time, I am not taking a position on such proposals and in fact believe
any discussion of congressional action at present is
premature.
Instead, I would like to offer a general
observation in the context of current and possible future federal
responsibility to assist industries shaken by catastrophic events, but
particularly those like insurance that traditionally have been regulated
on the state level. As a general rule I do not believe the federal
government should intercede to prop up a marketplace unless the
President of the United States in consultation with the Federal Reserve
determines that a failure to act would virtually lead to the collapse of
that marketplace and become precedent to a systemic-risk
event.
In this particular case, and in my capacity
of subcommittee oversight, I would be extremely reluctant to accept any
plan that puts the taxpayer on the hook for insurable losses when there
is no federal office that exercises any real jurisdiction over the
solvency and business practices of the industry. In other words,
consider a friendly southern note of caution about trying to escape an
unsettling situation: if you throw a saddle on someone else's horse, you
can’t gripe about where it takes you. So let's be careful
here.
U.S. House
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