H.R. 5840 (Kanjorski) On House Calendar Today Would Allow Treasury Dep’t to Preempt Certain State Laws
Santa Monica, CA — In a letter today to Congressman Paul Kanjorski (D-PA), Consumer Watchdog, a California-based nonprofit, said that the massive federal bailout of America’s largest insurer means that Congress needs to rethink a proposal that would give the Treasury Department the authority to negotiate international insurance agreements and then preempt unspecified state laws that conflict with those agreements.
Consumer Watchdog has worked with Congressman Kanjorski, who has amended the proposal to bar preemption of California’s insurance reform law known as Proposition 103 and related laws in other states. But, Consumer Watchdog said, with the $85 billion bailout of AIG announced last night, Congress should not be considering a bill that would allow any deregulation of insurance or overriding of state laws.
The group wrote: “AIG’s stunning collapse and unprecedented bailout was driven largely by the massive failure of financial industry deregulation and the policy of weak federal oversight of the banking system… H.R. 5840 would begin the process of allowing the policies that ‘screwed up’ the financial markets and destroyed AIG (as well as Lehman, Bear Stearns, etc) to undermine our system of state-based insurance oversight.”
The bill is currently scheduled to be taken up without debate as part of today’s House Suspension Calendar.
The full text of Consumer Watchdog’s letter follows:
September 17, 2008
Honorable Paul Kanjorski
2188 Rayburn House Office Building
Washington, DC 20515-3811
Re: HR 5840 In the Context of the $85 Billion Bailout of AIG
Dear Congressman Kanjorski:
When the federal government authorizes an $85 billion bailout and partial takeover of the world’s largest insurer, everything changes. We urge you to immediately withdraw your H.R. 5840 – which would allow a federal agency to preempt state insurance laws and replace them with international trade agreements – from consideration on the House Floor today. Nothing could be more inappropriate than having a suspension calendar vote on a major change to insurance company regulation in our nation in the wake of what just happened with AIG.
AIG’s stunning collapse and unprecedented bailout was driven largely by the massive failure of financial industry deregulation and the policy of weak federal oversight of the banking system. Indeed, Congressman Barney Frank, Chairman of the Financial Services Committee said yesterday "I mean this is one more affirmation that the lack of regulation has caused serious problems. That the private market screwed itself up and they need the government to come help them unscrew it." H.R. 5840 would begin the process of allowing the policies that “screwed up” the financial markets and destroyed AIG (as well as Lehman, Bear Stearns, etc) to undermine our system of state-based insurance oversight.
Earlier this summer, your staff agreed to work with us to limit the scope of H.R. 5840 and prevent international trade agreements from preempting California’s thorough rate regulation system installed by the state’s voters in 1988, known as Proposition 103. We agreed to stay focused on that issue and resolving that problem. But we never could have imagined then that the context for this discussion would change as dramatically and dangerously as it did yesterday. There is no doubt in our mind that you could not have imagined this either when you wrote the bill. But in light of the AIG bailout, we must have a much more thorough debate about the underlying issue of the federal government’s role in regulating an insurance industry that has been historically regulated by the states.
As such, we must ask you to pull this bill until the nation has had time to understand what happened to AIG and to the $85 billion we have been forced to give that company.
Sincerely,
Harvey Rosenfield
Douglas Heller
– 30 –
Consumer Watchdog is a nonprofit, nonpartisan organization. www.ConsumerWatchdog.org
