1. You misspelled "ludicrous"

2. "Dept, of Ludicrosity" sounds much better.

Noam,

Totally agree with your assessment.  All this is is a weak-assed CYA mechanism that doesn't much as screws taxpayers when they have to bail out a bigger collapse next time.  This setup is simply crafted to keep the wealthy happy: dismantle the New Deal for the middle class, create a New(er) Deal for the wealthy.  For all those people that as Dan Gross pointed out this last week in quoting Brink Lindsay's 'Age of Abundance':

"Members of the underclass operate within such narrow time horizons and circles of trust that their lives are plagued by chronic chaos and dysfunction," he says. By contrast, elites are well-organized long-term thinkers. Riiiiight. "Modern Wall Street is a system," says Charles Morris—a former Chase banker and author of The Trillion Dollar Meltdown—"that rewards crazy risk-taking in the short term without regard for the long-term consequences."

Link here:

www.slate.com/.../2187571

Take a gander too at the Option Federal Charter for the insurance industry that the Paulson plan is pushing.  That illuminating large-insurer goody bags insurance regulation altogether, leving the industry to regulate itself with an SRO and providing for "the elimination of price controls."  Sununu, introducing legislation for this deregulatory delight last May, had this to say:

“Unlike the modernization of banking and securities of the late 1990s under the Gramm-Leach-Bliley Act, the insurance industry remains subject to a patchwork of state regulations that have stifled competition, innovation, and growth,” said Sununu. “The existing governing system spreads across more than 50 jurisdictions and has proven burdensome and expensive for all concerned. A more uniform regulatory environment mirroring the highly successful dual banking system is long overdue and stands to substantially improve the environment for those who buy, sell, and underwrite life and property and casualty insurance.”

www.sununu.senate.gov/.../record.cfm

HIghly successful dual banking system...want to make sure we replicate that.

jet, I agree with you except for your CYA assessment That point is inaccurate. Paulson's plan is a result of  rigid adherence to ideology (i.e., laissez-faire philosophy) and the Bushies insistence that government NOT work.

Sorry guys, federal charters for insurers are essential. The cost and byzantine rules of the state regulations do not help. This is one area that needs to be done, the final death of McCarran-Ferguson. There is already a dereg environment for larger insureds. I do this every frickin day.

Leave the states do reg your HO and auto policy, get them out of everything else. Please tell me the number of new insurer formations in the US compared to BDA in the last 20 years, Okay? It can get capital back onshore.

But this dem as long learned that most dems, well.. "Math is hard!"

tkozal :

I take your point. However, I respectfully disagree, because the current system doesn't allow insurance companies to co-opt regulators. (There are simply too many.) Normally, I would support such a change. One regulator provides companies cost-savings because they have a uniform set of regs to follow.  

But the same efficiency comes at a cost. Insurance companies can concentrate their resources on winning over one regulator. A federal regulator would be unelected and not necessarily reflect the views of its TRUE constituents: the American people. State insurance commissioners and/or attorneys general, as elected officials who have smaller constituencies are more apt to reflect the will of the people. And for those of us who live in progressive states (I live in Maryland) who want a bit more consumer-friendly regulation (or at least regulators who aren't hostile to consumers), we'd get the sort of regulation we like.

Unfortunately, political appointees of federal agencies can getaway with lax or non-existent enforcement that reflects the ideology of a president, for who we didn't support. (See  blue states, Maryland, California and New York.)  The OCC and Fed can't be considered paragons of enforcement virtue. (Does the OCC chief even consider himself a regulator or a rubber stamp?) Consumer protection laws are vigorously enforced in most states. Under the Bush administration, the OCC has proven itself a   lackey and enabler of banks that abuse customers. It has done so in New York, Minnesota, and the regulation-lite South, namely Georgia. The Republican-dominated Georgia LEGISLATURE, attempted to pass legislation to curb sub-prime lending abuses. What entity stepped in to assert preemption authority and allow  lenders to continue abuses ? Why the OCC, of course.

So while I agree with you in principle, I can't support a single federal regulator for insurance companies. Plus, if after years of fighting federal regulation, if insurers now want the federales to come in, it can't be to benefit consumers.

Until criminal penalties for predatory lending practices are properly established and enforced, our current crisis will recur regardless of the regulatory environment.  The avaricious genius of the banking industry in repackaging supposedly "investment-grade" debt to get around extant regulation will never go away.  If you want to protect consumers from financial ruin, you must start at the source.

tec619, you obviously have no idea how insurance premiums are actually set....

in the world of commercial insurance, the lack of knowledge at the state level is why the biz is all in Bermuda.......have regulators who can actually tell "finite risk" from a hole-in-the-wall, things will be much better. You obviously have no experience with the stunning intellectual firepower in most state insurance departments.