Lawmakers will likely move towards establishing federal oversight of the insurance industry, but they should take a deliberative approach to reforming financial regulatory structure in general, a top Democrat on the House Financial Services Committee said yesterday.
Speaking at a North American Securities Administrators Association policy meeting here, Rep. Paul Kanjorski, D-Pa., said it is a certainty that Congress will seek to establish a federal office of insurance regulation.
"You can put that in the bank, that's going to happen," said Kanjorski, who is chairman of the Financial Services subcommittee on capital markets.
Supporters of such an office say it would offer insurance companies - including bond insurers - a so-called optional federal charter. Currently, insurance firms are chartered at the state level and subject to a patchwork of 50 state regulations.
But Kanjorski urged a go-slow approach on addressing broader regulatory reforms and argued against a faster tack being pushed by President Obama to come up broad proposal within the next two months.
"My own opinion is, slow down a little bit and do it right ... [The] unintended consequences could be catastrophic," he said.
Asked by reporters about the establishment of a systemic risk regulator, Kanjorski seemed less inclined to support a single regulator - which many believe would be handled by the Federal Reserve. Instead, he seemed to favor a consortium of existing regulators that would serve collectively as a risk "overviewer."
"I don't know that you could have a [single] systemic risk regulator," he said. "I don't think we want to add on a whole new layer of regulation."
Sen. Susan Collins, R-Maine, has introduced legislation that would establish such a consortium, which would be headed by someone appointed by the president. Several NASAA members gathered here said that the consortium would not be optimal unless state securities regulators were included in it.
Kanjorski noted that in light of the Bernard Madoff ponzi scheme, lawmakers are coordinating with legislators in the European Union on a "novel" proposal: establishing an international securities arbitration system. Kanjorski said negotiations would continue over the next several months.
At a later panel, Dean Shahinian, senior Democratic counsel on the Senate Banking Committee, said that the process of deciding which type of risk regulator to establish - a single entity or a consortium - is "still young."
But he noted that several panelists who testified at a Banking Committee hearing on the future of the capital markets last month endorsed the idea of a consortium, including officials from the Investment Company Institute and the AFL-CIO. And he urged state regulators to lobby lawmakers to have a presence in such a consortium, if it moves forward.
