By Silla Brush

The House Financial Services Committee next week is set to debate the highly contentious issue of whether the government should have the power to break up large financial firms even if they’re not about to fail.

Lobbyists for big banks are anxious about language still being drafted by Reps. Paul Kanjorski (D-Pa.) and Ed Perlmutter (D-Colo.) that would give new powers to the government to break up big firms and separate their different types of commercial and investment banking business.

Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) is working with Kanjorski and Perlmutter on the language and generally supports their efforts.

The Financial Services Forum, a group representing 18 large financial firms, has come out strongly opposed to the direction of the amendments. The forum and big financial companies argue that there is nothing inherent in large firms that makes them riskier and that they provide necessary products that smaller companies cannot.

Meanwhile, insurance lobbyists are closely examining a draft amendment to legislation setting up a Federal Insurance Office. The markup of legislation had been put on hold for two weeks while insurance interests clashed about the scope of the new office, particularly on matters relating to international agreements.

In earlier legislation, Kanjorski said the office should have the ability to coordinate and negotiate “international agreements on prudential measures.”

Insurance interests that traditionally have called for a new federal office that could preempt state laws were supportive of that language. But insurance groups that favor state-based regulation strongly opposed it and argued that the new federal office would sweep away state regulations.

The new amendment appears to make a significant change to the provision. In draft language, Kanjorski said that nothing in the bill should be “construed to affect the authority of any federal financial regulatory agency … and to preempt state measures.” That appears to favor the state-based interests.

Lobbyists for insurance industries that favor stronger federal powers may object to the new language.

On Friday, lobbyists for their counterparts praised the direction of the amendment.

“We’re pleased with some of the changes they’ve made on the international issue,” said Marliss McManus, senior federal affairs director at the National Association of Mutual Insurance Companies (NAMIC). The association continues to have other issues with the broad scope of the office.

“The authority to demand data and document productions more closely resembles the character of a regulatory agency than an information and research office,” NAMIC wrote in a letter on Thursday.

The National Association of Insurance Commissioners (NAIC), which represents state insurance commissioners, is continuing to review the new language and has yet to say whether it is in support.