On Friday, Timothy Geithner, Treasury Secretary nominee, was approached by seven members of the legislature, asking him to boost federal oversight of insurance companies, a goal long-held by much (but not all) of the insurance industry.
Republican Representative Ed Royce (California) and Democratic Representative Melissa Bean (Illinois) along with five others, wrote to Geithner and asked him to either, “… create an office within the Treasury Department or assign a high level Treasury appointee an insurance portfolio.”
Currently, there are over six thousand insurance companies operating in the United States, all without federal regulation. Instead, there are more than fifty state and territorial authorities which oversee them, and while some insurers are fine with this setup, many do not.
With the new presidential administration considering major regulatory reforms amid a financial crisis that has not yet abated, conditions may be advantageous for the powerful faction of the insurance industry that craves federal oversight.
The federal government has already committed $150 billion in assistance to bail out AIG (American International Group, Inc., which was once the world’s largest insurer. They collapsed last year after becoming overexposed in an unregulated market, due to credit defaults, and were subsequently undermined by the housing downturn.
Royce and Bean, as well as big insurance companies, like Allstate Corp., are longtime advocates of federal regulation. Their letter read, in part, “We all share the belief that we must take steps to ensure that a similar situation does not occur in the future.” It also pointed to last year’s bond industry problems as evidence of the need for greater supervision. Their letter was supported in a statement made by the lobbyist group, the American Insurance Association.
As to Geithner, he’s already pledged to strengthen regulation of such things as credit default swaps, and in a written response to questions from Michigan Democratic Senator Carl Levin, he said, “We are going to need sweeping changes, in regulatory policy, the oversight structure and in our tools for crisis management.”
Geithner faces a confirmation vote by the full Senate on Monday