AIG’s near collapse has at least one silver lining: the US House took HR 5840 (Kanjorski, D-PA) off the floor yesterday. The bill would allow the treasury department to override state regulation of the insurance industry. (Consumer Watchdog’s letter to Rep. Kanjorski is here.)
Kudos to Representatives Speier (D-CA) and Kucinich (D-OH), who rallied opposition to a bill that was flying under the radar on its way through the House with little debate. (Read their ‘Dear Colleague’ letter here.)
Consumer Watchdog pointed to the massive federal bailout of America’s largest insurer as good reason for Congress to rethink a proposal that would give Treasury the authority to preempt state laws that conflict with international insurance agreements.
AIG’s financial quandary stems in large part from its' unregulated financial transactions.
The insurance subsidiaries of AIG under state regulatory control remain financially sound, thanks to the very state protections that HR 5840 could open up to federal preemption. The stability of AIG’s insurance subsidiaries, thanks to state oversight, may well save the taxpayers’ $85 billion investment.