We’re going to have a lot to say about the costs of Treasury Secretary Hank Paulson’s Blueprint for a Modernized Financial Regulatory Structure. Before that, however, it’s worth noting that there is little to admire about our current financial regulatory structure. Largely a product of the financial crises of the past, the structure was unwieldy, arguably created a bureaucratic structure at odds with the constitutional framework of our Republic and tended to serve the interest of the very financial institutions it sought to regulate at the expense of individual investors and the broader public. The array of regulatory bodies we live with were largely “captured” by the securities and banking industry, although “capture” is probably the wrong term because it implies that they were independent at some point. Many were built to serve the interests of Wall Street, so no capture was necessary.
The best that can be said about the current system is that we have years of experience with it. We understand how it operates, how it fails and what its strengths are. This is a conservative point but one that needs to be made: regulatory innovation inevitably leads to “unintended consequences” and unanticipated costs. At the very minimum, the costs of adjusting to a new regulatory structure need to be taken into account. We may not be risking our lives and sacred honor by declaring the need to dissolve the longstanding financial regulatory bonds, but we may be risking our fortunes.
That said, we’re headed deep into the details of this bold new world Paulson has proposed. The Treasury has released a cheat sheet here. But if you are really ambitious, follow us into the 212 page blueprint. We welcome your insight, of course, in the comments below or via email to tips@dealbreaker.com.
Posted by NomadTrader , Mar 31, 2008 1:08PM
The very same people, just seven months ago, told us that things were "just peachy keen". We're going to totally restructure the regulatory financial system letting these MORONS take the helm? You got to be kidding, but never underestimate the power of gov't to totally fuck things up for the next generation or two. Careful what you wish for.
Posted by guest , Mar 31, 2008 1:30PM
Main Street thinks we've had enough innovation from Wall St for awhile. You fucking goons did this to yourselves.
Too many hedge funds and too many private equities...unregulated, black-box innovations, structured to serve only the innovators...and to fuck all the bag holders.
You know the two old sayings..."After innovation comes regulation" and "The more you tax something, the less of it you get"? Well, now we'll have an opportunity to regulate the hell out of them and to tax the shit out of them. Eventually, we'll have less (fewer) of them and of their style of innovation.
A third old saying..."Every great fortune is founded on a crime"... With that in mind, how's this for an innovative progression? "Fleeced Investors", Quanted-Up Bubble", "Sell Short", "All Get Rich". (I extracted these 4 points from a brilliant entry by another guest poster, and he deserves the credit for them).
I do wonder how our financial system ever did survive in the past without the likes of Steve Schwarzman and Pete Peterson?
Another thing...A few days back, some clown poster accused me of being oblivious to the grease that Wall St actually applies to a system that affects my personal life in so many ways and that I don't have a clue about. Well, the only "grease" I've noticed on Wall St lately is the grease lining the pockets of the innovators and the grease lining the tubes that the financial system is sliding down.
@10:32AM...As for all those lawyers, they don't know a damn thing more about these new regulations at this point than the rest of us do. The Wall St innovators would be better off taking this opportunity to have their own, in-house legal goons learn something new for a change. Maybe they could save themselves some coin in the process. They'll need it to pay those new taxes.
Finally, while I'm on a roll, I thought I'd get on somebody's case...That fat guy with the jowls who runs Lazard. He advised Carlyle Capital Corp and Bear Stearns. Where did his advice get them? Harvard Business and Harvard Law. What a waste of skin he is.
-The Guy from Delaware
Posted by guest , Mar 31, 2008 1:35PM
I wish we still lived in a Republic.
Great post John.
Posted by NomadTrader , Mar 31, 2008 1:35PM
You don't have to wade very far before you get, on page 5: "Treasury has developed each and every recommendation in this report in the spirit of
promoting market stability and consumer protection."
What a bunch of shit. Can anybody tell me what any regulatory body [SEC, CFTC, etc.] did to prevent Enron? Worldcom? LTCM? Amaranth? Bear? Where the hell were these guys?
This is nothing more than a federal power grab that will neither promote stability or promote consumer protection. Who do you think is going to work for these "new" bodies? Try the same old stiffs who infest the ones we got now.
"Hi, we're from the gov't and we are here to help" - this country is truly fucked.
Posted by guest , Mar 31, 2008 1:55PM
@ Guy from Delaware,
Did you get lost on your way to the forums at NY Times or HuffPo? Reactionary populist rants usually do better over there than they do here.
I'd be interested to hear how the investors in hedge funds and "private equities" don't benefit from the funds' activities. By the way, almost all of that money comes from sources like pension funds, which presumably you would like to continue to have money.
Congratulations, though, on your cherry-picking of buzzwords and profanity-laced "tax and regulate" proposals that lack any substance and logic. I'm sure this makes you very popular with your pseudo-intellectual liberal friends.
Posted by guest , Mar 31, 2008 2:01PM
We need to stop "thinking" because that is a LIBERAL thing. I mean, look at the Constitution and Bill of Rights. Two of the most LIBERAL things ever written!! Someone was THINKING when such LIBERAL documents were conceived. As soon as we can stop all this independent THINKING we can stop LIBERALs.
Michell C_C looks pretty hot in that blouse! Oh...and pass me some Oxycontin.
Posted by zzz1357 , Mar 31, 2008 2:03PM
@1:55PM,
Well put.
Posted by guest , Mar 31, 2008 2:08PM
@ 2:03PM
doubleplusgood
Posted by legal eagle , Mar 31, 2008 2:18PM
@ Guy from Delaware
Are you one of the types who thinks that the American public is too stupid to do anything on their own and therefore should be protected from all actions for which they should be held accountable?
Granted, the "innovators" may have missed the mark this time and created an instrument that failed, but they also had to have willing buyers for that instrument. Unless they lied to induce consumers to buy their products, they really didn't do anything wrong (stupid maybe, but not wrong).
I mean seriously, a bank may encourage a low income individual to purchase a home at a high interest rate, but the individual has to agree. Why shouldn't we "regulate" those individuals and force them to do their diligence before signing on the dotted line. Or better yet, why don't we just not allow anyone to own homes, get credit cards, etc. unless they have a requisite income level/job stability. What do you think the logical result of that would be? The poor would be even more f*ucked than they are now because their opportunity to expand their wealth would be severely limited.
And for hedge funds and PE, the world does not want them to be regulated. Half of the investors want to invest in them to diversify in an instrument that is not governed by the government.
Sorry for the long rant, but I get so tired of people who forget that it takes two to tango. Taken to its logical extreme, you are advocating a socialist/communist society that doesn't allow individual thought and that thinks the government is better at choosing for the people than the people are at choosing for themselves.
Posted by guest , Mar 31, 2008 2:18PM
@ 2:01,
See my comment @1:55 RE: this not being NY Times, etc. I think all of the regulars here at DB (and I count myself among them) welcome discourse, but these pointless rants / profanity / all caps are more than a little played out.
Come back when you have something worthwhile to say.
- REPE
Posted by guest , Mar 31, 2008 2:27PM
@ 2:01
The Constitution and Bill of Rights are actually quite LIBERTARIAN. You should try reading them sometime then lookup the definitions of the L words.
Posted by Investorcluzo , Mar 31, 2008 2:28PM
it’s all about 3 words: “execution, execution, execution”! I have full faith that our elected representatives will find a way to snatch defeat from the jaws of victory. despite paulson’s roots, I believe his time on the government payroll has dampened his well honed business acumen. that said, the current state by state insurance regulation is antiquated and creates more harm than good. but the insurance lobby has more money than bloomberg and will likely defeat any of the proposed changes which would actually do us all some good.
Posted by guest , Mar 31, 2008 2:37PM
@2:18 Who appointed you the arbiter of what does and does not constitute acceptable discourse on the hallowed pages of DB? If you don't like it, skip over it. That's the nature of a blog. Another "Regular"
Posted by Lowly Assistant , Mar 31, 2008 2:44PM
@ legal eagle,
Well put. As I've said before, responsibility for one's actions need not exist in our society. Although I wish someone would start "regulating" the amount of credit offers I receive in the mail, that's business. Whether I wish to shred the "opportunities" or fill out the information is completely left to my desire. Acrruing debt is 100% American, but we must use discretion when doing so. When will we have mentors circling the neighborhoods dropping by to make sure we're all making wise financial decisions? I, too, have a tough time choosing between food on the table and a new flat-screen... (fucking retards.)
I wish they'd regulate breeding, and prevent shitty individuals from having shitty kids. Maybe that would break the lineage of people unwilling to accept the ramifications which follow their actions.
Posted by EE , Mar 31, 2008 2:58PM
@Nomad, 1:35
though I am not a fan of regulation myself, you can't deny that although regulation didn't prevent LTCM, it helped avert a disaster.
it didn't prevent Bear but it did provide peace of mind (i won't even dare use the "r" word because thats pure dog-poo)
i agree that regulation isn't a good thing but a safety net is nice to have in times like these
Posted by guest , Mar 31, 2008 2:59PM
Doesn't surprise me, but these libertarian tendencies seem to flare up only when the pain falls on others. They were noticably absent, for example, when the Bear folks were were crying about the injustice of being trampled on by JPM. A true libertarian would have gone home and chalked it up to survival of the fittest.
Posted by diablo , Mar 31, 2008 3:01PM
Guest @2:27
We are the libertarians, we don't need a stinkin' constitushon.
Posted by Finnegan , Mar 31, 2008 3:39PM
@1:30
I think I was the clown that mentioned the grease that Wall Street provides to the economy, making us a bit different from say, nations in Africa or in the back of your imagination, and how every functioning country on earth has their version of "Wall Street" and capital markets.
Periodically, Wall Street, the average American, you, me, the government, screw up. Usually about every ten years or so. That's what happens in an economy.
After reading your astute analysis in your rant, I do have to agree that you certainly are on a roll, have provided some cheese, and are quite the ham. Given your outburst, it's the first time I have seen ignorance unaccompanied by bliss.
As for Paulson, well none of this is going to get passed any time soon; it will be run through the political spin cycle and come out in 2009 as a differently crafted garment. Paulson is pushing for the tuxedo, and it will ultimately end up looking something like a unitard.
Posted by Anal_yst , Mar 31, 2008 3:40PM
@ 2:59
I'm pretty sure many of us, especially those who consider ourselves Libertarians, were 'chalking it up to survival of the fittest' (although of course, nothing is so cut & dry as extreme libertarianism would have us believe)
Posted by guest , Mar 31, 2008 3:47PM
@3:40 My point was that "many of us" most certainly didn't include anyone from Bear. I'm sure any libertarian tendencies there flew out the window as the stock price declined. Which is just human nature and why people whose bellies are full shouldn't be so dogmatic about other's pain.
Posted by guest , Mar 31, 2008 3:50PM
@1:55 REPE?....Actually, I'm not a liberal. On the contrary, I'm a frustrated conservative. I won't talk politics with the few liberal friends I do have because if I did, we wouldn't be friends any more. There is more to friendship than just political views.
I don't use caps either.
Perhaps you are confusing "investors" with "bag holders"? In case you don't already know, oral arguments began this afternoon at 2 PM in the Delaware Chancery Court for the case of the Police & Fire Retirement System of Detroit V. Bear Stearns.
Maybe you can explain to us all how those poor bastards from Detroit who are not sopisticated(their jobs are put out fires and to beat up on moslems and nigs) and who trusted in Bear's expertise, should be considered knowledgeable "Investors" and not "Bag Holders"?
-The Guy from Delaware
Posted by Anal_yst , Mar 31, 2008 3:52PM
@ 3:47
Fair enough point there, as I'm sure you're correct.
It is a fact, unfortunately, that while we may claim to be libertarian, when times are good we're not so principled as to question sustainability, but as soon as we reach that inflection point, whooops! ...back to principles
Posted by guest , Mar 31, 2008 3:56PM
@3:50 News flash: the Detroit policemen don't sit around and invest their pension fund, like a fkng investment club. Its managed by institutional money managers, typically chosen with assistance from pension consultants, who counsel on portfolio construction and manager surveillance.
Posted by guest , Mar 31, 2008 4:08PM
@3:50
The lawsuit you mentioned is directed at the BSC / JPM merger and has nothing to do with PE shops or hedge funds, but for the ones BSC operated that were at most a secondary cause of the firm blowing up. The failure of BSC was largely due to failings of public management. I'd venture that if BSC had been a portfolio company of a major PE shop, it would've been significantly better managed and would still be afloat today.
3:56 is spot on regarding the sophistication or lackthereof of the Detroit folks who got hosed.
-REPE
Posted by guest , Mar 31, 2008 4:20PM
@3:56 News Flasher: How many fees got charged along the way by all those "pros" who were supposed to be looking out for their client's interests? The same "pros" who said, "Oh well, don't blame us. We trusted Bear too" when the portfolio took a shit?"
You seem to have a lot of clever, jargon-filled retorts in your arsenel but no common sense.
Who is left holding the bag? That whole chain of pros or the Pension Fund itself? Who's in Chancery Court today?
Posted by guest , Mar 31, 2008 4:25PM
I forgot to add -The Guy from Delaware- to my 4:20pm posting.
Posted by guest , Mar 31, 2008 4:29PM
Carney,
You are whupping Lat's ass today by actually discussing the Treasury plan while ATL gives it a bye as if it wasn't like, possibly, DC's biggest gift to Biglaw since Sarbox.
Posted by legal eagle , Mar 31, 2008 4:38PM
I think we all agree that the collapse of Bear is a terrible thing for both the investors in and employees of Bear. But the pension funds shouldn't be getting hit too badly by this unless they had terrible managers. We all know that a good money manager will diversify the holdings, thus reducing the risk of any single stock or industry getting slammed.
So, if the pension fund beneficiaries are getting hit, it's not necessarily Bear's fault, it's the fault of the fund's manager who invested too large a percentage in Bear. And, as 4:08 wrote, the fund is suing to enjoin the merger because it thinks the price is too low. As a lawyer, I know that this is not novel. I doubt ANY merger occurs without a shareholder suit alleging that the price was too low. No big deal, happens every day. And the truth is, it happens because, on the off chance that the plaintiff wins (which is rare), the lawyers reap windfall profits.
Posted by guest , Mar 31, 2008 4:49PM
@3:56 here. I have some expertise with portfolio theory and institutional money management, especially as it pertains to public funds, a subset into which the Detroit Policeman's Pension Fund falls. I'm not sure where to begin, but let me give this a try.
In general what's happening is that people acting in good faith and receiving fees that are transparent and negotiated at arms length (the consultants, money managers, et al) made a bad investment decision by having Bear common in the unions pension fund. They might also be holding Google, which is down, what 30% (growth stocks are not my area)? They also hopefully made some good decisions to offset the bad ones. If not, there's probably a mechanism in place for regularly evaluating managers and terminating those that dont deliver. The particular facts surrounding the Bear blowup however appear to have led the trustees or managers to conclude that they have a chance through litigation to recoup some of the loss. I doubt the're gonna sue Google - that's a loss they're gonna eat. All part of managing a big and complex portfolio, the size and complexity of which mean that the Bear blowup and Google stumbles are far from fatal.
Posted by guest , Mar 31, 2008 4:55PM
@4:49 here. Good job there 4:38 (for a lawyer). Let me add though that its not the pension fund beneficiaries that are going to be hit - its the Detroit taxpayers. The retirement benefits are fixed by contract. If the portfolio underperforms the taxpayers are going to have to put in larger contributions to support those payments.
This underscores the difference between pension (defined benefit) and 401k (defined contribution)plans. In the former the benefit is fixed and the sponsor has to make up investment shortfalls, in the later the benefit varies according to investment performance.
Who's in favor of privatizing social security raise yr hand.....
Posted by legal eagle , Mar 31, 2008 5:07PM
@4:55 Good point. I believe that's how GM got in so much trouble years back: they guaranteed a certain percentage return but couldn't deliver because their funds got hit, so they had to renegotiate the whole thing to avoid bankruptcy (Delta had similar problems).
And not all lawyers don't understand that whole efficient capital markets hypothesis thing . . .
Posted by Anal_yst , Mar 31, 2008 5:09PM
Above posters bring up a good point, I think: The end-factor is not that the managers screwed up (although they likely did, to some degree), that Bear screwed up (of course they did), or that the price is too low (who knows?).
Defined-benefit plans are antiquated, and by definition offer managers an incentive to increase risk to maximize fees, since, while it may result in their dismissal, they have the safety net that taxpayers (etc) will make up the shortfall in available assets to distribute to beneficiaries.
Just my two cents for the day.
Posted by guest , Mar 31, 2008 5:19PM
Anal_yst One can argue about DB vs. DC and its sister problem of privatizing social security or not, both sides of which have merit.
The notion however that there is an incentive for managers to increase risk is generally not true. First, fees in traditional asset classes (equities, fixed income) are not usually based on performance. Hedge fund managers do receive performance based fees, but that's a relatively small part of the fund. More importantly, large funds budget risk and allocate it by hiring both high risk and low risk managers. The later stick totally or closely to the benchmark, either indexers or closet indexers, and are paid accordingly.
Posted by Investorcluzo , Mar 31, 2008 5:24PM
at the end of the day this is all about guarantees. most of the posters here will not rely on soc. security (just a guess, be thankful for that). if you look at GM and delta, the problem starts with the unions. while I would not argue that they served a purpose, I would argue that the purpose has long since vanished. let the free hand reign people! wages will reset and their benefits will become based on a competitive marketplace. similarly, the safety net known as soc sec, is no longer viable; it has over-promised and will under-deliver. sweeping changes need to be made, but allowing the unwashed masses direct a portion of “their guaranteed” benefit would be like letting a blind man/woman drive a car (no offense to those with impaired vision, just trying to make a point). discuss…
Posted by guest , Mar 31, 2008 5:27PM
I was sorry to see Delaware guy go off on such a rant. I hope he isn't a law clerk or anyone in any position to influence the outcome of the Bear case, because he obviously doesn't understand what happened to Bear.
The insurance proposals of the Treasury would mean the creation of a huge new federal bureaucracy to replace the state regulatory systems. Of course, the counter-argument is that some current federal bureaucracies (like OTM) would be eliminated. If Congress isn't prepared to fund such an enterprise, they should be careful what they do with the current system, because a few insurance blow-ups mean a world of hurt for what ever politician is in overseeing the agency, or whose constituents are affected by lax delivery of services. Would bread-and-butter coverage issues be transferred from state to federal courts? It would be quite a change for the courts to manage.
Posted by Anal_yst , Mar 31, 2008 5:29PM
@ 5:19, thanks for the correction (no sarcasm, for a change). Perhaps the rationale (incentive scheme) was wrong, but in modern capitalism, I think more often than not one could argue that DC, while not as attractive from a security standpoint to the beneficiaries, privatises shortfalls and incentivized beneficiaries to diversify for later-in-life income, instead of relying (primarily) on the defined benefits. Of course this is not news, so I guess I"m just stating the obvious, d'oh.
Posted by guest , Mar 31, 2008 5:30PM
5:19 here. I would take issue that the problem started with the unions. In the dark days of autos and airlines management promised generous retirement benefits (including medical) in lieu of salary increases. And hoped that the future would bring larger profits with which to fund those benefits. Problem is that the days are still dark in these industries, its time to pay the benefits and the pot is not as full as it should be. Sounds like the problem was management.
Posted by guest , Mar 31, 2008 5:32PM
I think most baby boomers are going to be appalled when it's time to live off the interest of their savings and social security. Their savings won't be nearly adequate to supporting most of them, and there will be tremendous pressure to increase social security payments rather than reducing payments or eliminating them altogether.
People with defined pension plans will consider themselves the lucky minority.
I'm speaking of the general public, not DB readers, of course.
Posted by guest , Mar 31, 2008 5:37PM
Often when a DB plan is terminated a more generous DC plan is put in its place (or an existing DC plan is made more generous). The end result (how much do I get when I retire) should not be that different. The difference though is who will shoulder the responsiblity for investment performance. The sponsor (in a DB plan) or the beneficiary (DC plan).
Posted by guest , Mar 31, 2008 5:54PM
The Guy from Delaware here...Thanks to Finnegan@3:39pm for claiming authorship of that business about the grease of Wall St that lubes the economy.
Glad I was able to provide some cheese for today with the astute analysis embedded in my initial 1:30pm posting.
Though I confess to a level of ignorance when it comes to the more esoteric realms of Wall St symantics, I do genuinely appreciate the lively and informative discussion that ensued.
Thank you especially to Finnegan, legal eagle, REPE, Anal_yst, and the others who made all the thoughtful and lucid entries. They have been most helpful.
Now, what about the fat dude who runs Lazard? Nobody said a damn thing about the lousy advice he gave to Bear and to Carlyle Capital. How can anyone pay good coin to that slug for his kind of misguided counsel?
Regards,
-The Guy from Delaware
Posted by Investorcluzo , Mar 31, 2008 6:11PM
@the guy from DE…read the fine print, every “fairness opinion” is based on the facts as they appear at the time the opinion is delivered. it’s very likely that bear would have gone belly up had it not been for jamie d and the boys. thus, their advice was “reasonable” on sunday night - in fact, I heard deutsche had stopped accepting counter party risk from big daddy cayne as early as the tuesday before the big foreclosure (it wasn’t a bailout). the world has since changed and now the shareholders have suddenly grown a pair. but before you start chirping that this is all smoke and mirrors with a wink and a nod, I would note that the bankers at rock center get paid each time they provide an opinion to the board (whether or not they say it’s fair or not). so they've already been paid twice (how about another bid?). if anything nefarious is going to happen, you need to keep an eye on the buyside’s bankers…they only get paid if a deal closes.
Posted by guest , Mar 31, 2008 6:44PM
@5:27, the proposal is to create a federal insurance regulator that would co-exist with the state regulators. The federal charter would be optional. At first blush it seems ludicrous to add a huge federal regulator to an already unwieldy mix of over fifty state/territorial regulators, but the overall benefits of the proposed elimination of rate regulation (i.e., price controls) for federally chartered insurers cannot be overstated.
- Insurance Person
Posted by Investorcluzo , Mar 31, 2008 6:48PM
@IP, well said. case in point: florida. that is a train wreck waiting for the next hurricane.
Posted by guest , Mar 31, 2008 6:56PM
@5:32 - Americans have savings?
Posted by guest , Mar 31, 2008 7:18PM
I'm sure the major insurers would love the alternative of obtaining a federal charter that would avoid state rate regulation.
However, isn't it being authorized to conduct business in a state that subjects insurance companies to a variety of state fraud and consumer protection laws? How would these state fraud and consumer protection laws continue to apply to a federally chartered insurance company?
In the case of Florida, isn't most hurricane insurance handled by a state plan that's already strapped? I note that the federal proposal wouldn't take over "residual plans" as state plans for insurance private insurers don't want to provide are called. I'm not surprised that federal regulators don't want those headaches.
Posted by guest , Mar 31, 2008 7:23PM
Guy from Delaware -- I object to the use of the word "nigs." Obviously, there are a few problems on this website about anti-Semitic and ethnically insensitive terms being bandied about, but so far in my reading, DB commenters have avoided the worst racial terms. Let's keep it that way.
Posted by InsurancePerson , Mar 31, 2008 7:58PM
@7:18, the Blueprint envisions the federal regulator working "in tandem with the states" on areas like fraud and consumer protection laws. I don't know how this would actually work; do nationally chartered banks deal with this issue?
Florida has two state-run mechanisms that deal with hurricane risk, both of which essentially move the cost of insuring such risk onto Florida taxpayers and insurance consumers. It is socialism, pure and simple. The federally chartered market wouldn't do anything to alleviate the burden that Floridians continue to bear for past hurricanes, but it will (in theory at least) stop forcing low-risk property owners to subsidize high-risk property owners for future storms through their insurance premiums.
Posted by guest , Apr 01, 2008 1:15AM
Insurance Person -- thanks for continuing to comment on the issues of federal regulation of insurance.
I don't know how federal regulators would work in tandem with the states on fraud and consumer protection laws. My feeling is that state court litigation about bank fraud and consumer protection isn't as extensive as state court litigation about insurance fraud and consumer protection, because the federal government has had a role in regulation of the banks for so long.
I started to read the 212 page proposal after John Carney posted the link, but believe it or not, other business pressures intervened.
I do know that one of the big weapons insurance regulators have against insurers is removing their right to do business in a state, which would change if insurers could do business with a federal charter.
Anyone know about how federal/state bank fraud and consumer protection laws work?
Posted by guest , Apr 01, 2008 9:42AM
Insurance.... Seems to me totally ripe for regulatory reform. Not a market I have a lot of expertise in, but everytime I dip into it - example: company owned life insurance as a way of funding a deferred comp arrangement - I come up against astronomical fees, sales practices that border on deceptive. The excuse is that the tax benefits unique to insurance will more than offset the costs. True, but I want to keep more of those benefits. I think the real reason is that ignorant state regulators are essentially being bought by the industry. What think you insurance guys.
Posted by InsurancePerson , Apr 01, 2008 10:42AM
I don't work in life insurance, so I won't comment on the need for regulatory reform there, but I agree that the property/casualty market needs it. The current system in which a company has to deal with a regulator in each state in which it wants to do business is obviously wasteful and, as someone mentioned earlier, antiquated. As far as the industry buying the regulators, I think this varies widely by state. In states where the insurance commissioner is elected, insurance regulation becomes highly politicized and industry influence is muted. A commissioner who is using his/her office as a springboard for the next governor's race does not want to look like an industry stooge. Elsewhere the industry may have more influence, but the opportunities to exploit the most vulnerable insurance consumers--individuals and small companies--are still quite limited, at least with regards to price. The property/casualty contracts that these consumers buy are highly commoditized and it's not that hard for the consumers to shop around.
Posted by guest , Apr 01, 2008 10:58AM
Thanks for that 10:42. How about you life insurance guys, acting like Amway salesmen, hawking investment vehicles with tons of fees, all because of a flimsy insurance wrapper that provides some tax relief. Relief that accrues to your industry for no rational reason, but only because it lobbies well.