USAA

Joe,

USAA, a bank which usually caters to military family's asks members to call senators about Volcker rule

USAA members and friends are urged to contact U.S. Senate regarding financial services legislation.

The Volcker Rule
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, like USAA. In particular, this bill directs regulators to prohibit government insured depository institutions from engaging in "proprietary trading," whereby a company trades for its own account. However, the reach of the bill extends beyond the bounds of a depository institution to its affiliates and subsidiaries. For insurers that own banks or thrifts, like USAA, this could mean that all of the investment activity essential to the running of the insurance operations would be significantly limited to investment in only government securities, despite these operations already being heavily regulated by state insurance regulators. The result would be that products that require more robust investments to support them would be limited to government securities, which do not earn enough to keep the cost of such products affordable.

To illustrate this effect, insurers collect premiums from customers in return for a promise to pay a possible future claim. During the time between the collection of premiums and the claims payout, the insurer takes those premium dollars and invests them in order to ensure that funds exist to pay later arising claims. By limiting an insurer's investments to government securities, that insurer may not be able to generate the income necessary to continue offering its products at affordable rates. This could then result in the need to charge higher premiums on policies and pay less favorable rates on annuities.