Key Development: The House bill would clarify language in section 171 of the Dodd-Frank Act, delineating the Federal Reserve Board's authority over large insurance companies, but also additional measures that could harm its chances in the Senate.

Next Step: Insurance companies favor the bill but the broader measures are not universally supported and aren't expected to advance in the Senate, said Rep. Maxine Waters (D-Calif.).

Sept. 16 (BNA) -- The House voted 320-102 to pass legislation (H.R. 5461) that expands a Senate-passed measure to clarify the Federal Reserve Board's authority over insurers, but the additional proposals may sink its chances for becoming law.

Compared to the single technical change in the Senate measure (S. 2270), the House bill passed Sept. 16 makes three changes to the Dodd-Frank Act. Sens. Susan Collins (R-Maine), Sherrod Brown (D-Ohio) and Mike Johanns (R-Neb.) co-authored the Capital Standards Clarification Act (S. 2270), introduced April 29 and passed by the Senate on June 3

The measure clarifies the Federal Reserve Board's regulatory authorities under Dodd-Frank's Section 171. The section was written by Collins and is known as the Collins Amendment. While its author has repeatedly said the section already gives the Fed that authority to make those distinctions, the Fed has balked at using that interpretation.

The House measure, sponsored by Reps. Andy Barr (R-Ky.) and Gary Miller (R-Calif.) would also target Collateralized Loan Obligations (CLOs), points and fees under the qualified mortgage rule and margin requirements. The expanded proposal is bad news for big insurers like Prudential, American International Group and MetLife, according to a research note from Compass Point Research & Trading LLC's Isaac Boltanksy, “as it complicates the bill's passage and extends the period of regulatory uncertainty for [Significantly Important Financial Institution] insurers.”

“We continue to believe that the Collins Amendment fix will become law in this Congress, but note that the bill may be taking a detour to passage,” Bolstansky said.

Insurance associations overwhelmingly support the measure, however, regardless of its legislative chances. A Sept. 15 letter to members signed by 22 insurance, finance, real estate and business associations said the Barr-Miller bill will address some of the problems that have arisen during the ongoing implementation of the Dodd-Frank Act. The group of associations include the American Banking Association, the American Bankers Insurance Association, the American Insurance Association, the Financial Services Roundtable, the Mortgage Bankers Association and the U.S. Chamber of Commerce.

“We believe the Barr-Miller bill, comprised of a series of noncontroversial, thoroughly examined, bipartisan proposals will fix these unintended consequences and help make financial reform more workable and effective,” the letter said.

Some House Democrats oppose the bill, however, believing the House version needlessly complicates the straightforward Senate version. Rep. Maxine Waters (D-Calif.). Waters also criticized what she called the Republican's “abuse of the legislative process” for bringing up controversial measures under suspensions of the rules, an expedited process that limits debate.

The broader measures are not universally supported, Waters said in floor remarks late on Sept. 15, and means the bill “is going nowhere in the Senate.”

“It is well-known—and widely-reported—that Republican leadership has privately told insurance industry stakeholders they will bring up a ‘clean' insurance capital standards bill after the mid-term elections,” Waters said. “It simply shows the disgraceful nature of this debate—and the partisan, dilatory tactics—that create more distrust in the political process.”