The Federal Insurance Office is an office without enough to do. For one thing, Congress gave the FIO the responsibility of reporting on "how to modernize and improve the system of insurance regulation in the United States" in the aftermath of the Great Recession. More about that particular task in a future article.
The FIO seized upon its report-writing responsibility as an opportunity to grab power. The chief of the Federal Insurance Office wants Congress to expand the role of the FIO, he reported in his report on how insurance companies have performed in the aftermath of the Great Recession.
If Congress were to confer these new powers of regulating insurance companies on the Federal Government, then in addition to enacting new laws, Congress would also have to repeal at least a part of the Sherman Antitrust Act and the McCarran-Ferguson Act, and probably more Federal statutes. Under these and similar statutes, Congress reserved the authority to regulate insurance to the States. That is how State Insurance Commissioners have accumulated lots of experience in regulating insurance companies, and how Federal authorities have accumulated virtually zero experience in regulating insurance companies. Parenthetically, the FIO's enabling statute was only passed in Congress in 2010.
This is a particularly inopportune time for the Federal Insurance Officer to announce his pursuit of greater regulatory powers. In particular, the expertise if any of the Federal government in insurance matters is not held in high regard right now, not with the manifest failures of www.healthcare.gov for the past two-and-one-half months and continuing even now.
The FIO's report goes too far. Not only substantively but historically. For example, the FIO report advances the notion that State officials were the officials who failed to adequately regulate the use of credit default swaps, which are really a form of credit insurance after all. Federal Insurance Office, U.S. Department of the Treasury, "How to Modernize and Improve the System of Insurance Regulation in the United States," pp. 18 et seq. (December, 2013; released to the public on Thursday, December 12, 2013).
What the FIO leaves out of this poorly timed, inadequately thought out report, is that Congress prohibited States from regulating credit default swaps. In particular, the infamous Gramm-Leach-Bliley law exempted the regulation of credit default swaps from the jurisdiction of State Insurance Commissioners.
This FIO report is not simply off the mark. That does not fully describe what is going on here. A full description would include that what the FIO is doing is in bad faith.
© 2013 by Dennis J. Wall. All rights reserved. No claim to original U.S. Government works.
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