Last night the US House of Representatives overwhelmingly passed a vote to renew the Terrorism Risk Insurance Act (Tria).
But the bill now moves to the Senate where its future is far from secure.
While the overwhelming bi-partisan support for Tria in the House, and the shape of the bill being broadly in line with the Senate’s own extension proposals which it passed in July, additional riders to the bill concerning alterations to the Dodd-Frank act are threatening to derail its progress.
The final piece of legislation is in line with the compromise deal between Rep. Jeb Hensarling (R-TX) chairman of the House Financial Services Committee and Democratic Senator Charles "Chuck" Schumer (D-NY), which Reactions was told about of last week.
The bill also seeks to modify the Dodd-Frank Act, by incorporating a rule which will relieve insurers of capital standards regulations that originally targeted bank and this part of the bill is not being opposed by the Senate.
However, Hensarling has also sought to inject an "end-users" provision into the legislation which would change the law, so that non-financial institutions do not have to follow some of the same restrictive financial regulations as investment banks.
Democrats have balked at these proposals and it threatens the bill’s passage through the Senate, with Democratic Leadership in the chamber opposed to any such sweeping changes to Dodd Frank, which they say would threaten the US economy and allow the type of deregulated financial dealings that helped bring down the economy in 2008.
Republican attempts to change Dodd Frank also threatens to halt the passage of the financial omnibus bill which is to be voted on in both chambers today, which will result in a government shutdown if it is not passed by this evening.
Reactions has spoken to a number of sources close to the matter in Washington and it remains unclear about what will happen in the Senate today.
Democratic leaders in the Senate, including Senator Schumer and Senator Elizabeth Warren (D-MA), have been vocal about resisting Republican attempts to alter Dodd-Frank.
Over the past weeks there has been threats from the Democratic leadership that they, and their colleagues in the Senate, will vote against the bill if the “end-users provision” was included in the legislation.
If this happens, then Tria will not be extended tonight. The Senate can be a procedural nightmare for legislation and a smooth passage would be needed if Tria is to be passed before the end of the session.
However, a few Washington sources have revealed to Reactions that they are still hopeful that this is will not happen, and that Democratic Party leaders may end up biting the bullet on Dodd-Frank to ensure that Tria goes through, for the good of the country and the economy.
Last night the White House expressed strong disapproval of Republican attempts to change Dodd Frank but, most importantly, did not threaten a veto, Democrats in the House also overwhelmingly voted for the measure which included the Dodd Frank alterations.
“After September 11, it was impossible for businesses to buy the terrorism insurance they needed to move forward with major construction projects,” said Congresswoman Carolyn Maloney (D-NY) following the House vote last night. “Development came to a halt, money for new projects dried up and our economy suffered a devastating blow. Nowhere was that more true than in New York.
“The Terrorism Risk Insurance Act was the solution, and it remains the solution. By providing a government backstop, it ensures that terrorism insurance is available and affordable, and the program works at no cost to taxpayers.
“After months of negotiations, I am so pleased we were able to pass this essential legislation.”
The importance of Tria extension has now also become headline news across the US, and Democrats in the Senate would be making a very unpopular move if they halt the extension of Tria today.
in addition to this a larger fight is on the cards today with the financial omnibus bill, and that might be the battleground over which the larger political issues are fought over today rather than Tria.
Republicans will also take control of the Senate in January, which may make the eventual changes to Dodd Frank a fait accompli.
All this will undoubtedly be on the mind of Senate leaders today and Democrats in the House, and the Obama administration, seem to have made it clear that they are leaving responsibility for Tria in the hands of the Senate leadership.
Democrats in the Senate know how important this bill is, they have overwhelmingly supported its renewal for well over a year now, and it would be a very bold move to torpedo it now over minor alterations to Dodd Frank.
However nothing is certain in this Congress and everyone who has a stake in Tria renewal will be keeping a close eye on discussions in the Senate today.
The insurance industry also remains committed to the need for Tria.
After the vote last night, Leigh Ann Pusey president and chief executive (CEO) of the American Insurance Association (AIA), expressed her support for the continuing need for the programme.
“AIA strongly supports a long-term reauthorization of TRIA by year-end. Today’s vote in the House affirms that there is significant Congressional support for a long-term reauthorization,” said Pusey. “Terrorism is a matter of national security and as such a responsibility of the federal government.”
“The legislation’s changes to TRIA, which are consistent with the House-Senate compromise, will further increase the private sector’s 'skin in the game' while providing policyholders and businesses the certainty they need to help grow our nation’s economy.
"TRIA has long enjoyed strong bipartisan and bicameral support. We urge the Senate to pass the six-year TRIA bill compromise before Congress adjourns,” she continued.