A former federal regulator and law professor warned a panel of state insurance legislators this weekend that if they don't immediately act to regulate the market for credit default swaps they risk losing their powers to the federal government.

The swaps market has fallen into a regulatory "black hole" and state governments must step in to fill the void, University of Maryland law professor Michael Greenberger said. Even though he believes the states have done a good job regulating the insurance businesses they had control over, the conventional wisdom in Washington, D.C., is that the states have failed and a national insurance regulator is needed, Greenberger warned.

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