Encouraged Investment Is Not Wasted Money

I must respond to state Sen. Dick Ackerman’s letter, “Forcing Investment May Hurt, Not Help” [Sept. 23].

In 1996, at the request of the insurance industry, state legislators, insurance lobbyists, then-Insurance Commissioner Chuck Quackenbush and other interested parties reached a compromise on insurance reinvestment bills pending in the California Legislature that created the California Organized Investment Network, or COIN, as a part of the California Department of Insurance.

The insurance companies’ motivation, of course, was to avoid legislation that would have required them to invest in low-income urban and rural communities similar to the federal Community Reinvestment Act, or CRA, which applies to the banking industry.

The CRA and corporate citizenship have resulted in banks investing some 20% of their profits back into the communities they serve.

To date, COIN has had roughly $480 million invested during its more than four years in existence. This represents slightly more than one-thousandth of the approximately $475 billion in premiums the network has collected in the state. The overwhelming majority of these investments are mortgage-backed securities that include the loans of upper-, middle- and lower-income people and would qualify for Wall Street investment. (Hardly high risk, Senator.)

Insurance Commissioner Harry Low has only encouraged the insurance company executives to honor their agreements to voluntarily make investments, either through COIN or directly, that would benefit California’s less-affluent communities. He has not, as the senator’s letter implies, asked them to pour their money down a rat hole.

Quackenbush gave the insurance companies a chance to rise above their usual behavior and show some corporate citizenship. Not surprisingly, they failed.

Cecil E. Byrd

Whittier