"The
federal government should oversee insurance," U.S. Rep. Paul Kanjorski
(D-PA) said yesterday as he convened another House hearing on how to
regulate risk. How? He’s still not sure.

Gotta do something. State regulators in New York and Pennsylvania say
they did a fine job regulating pieces of American International Group
Inc. But AIG still failed, provoking a multibillion-dollar federal
rescue.

A powerful Washington sheriff could police big, complex insurers. But
what if the new federal insurance watchdog set up rules and rates that
were weaker than the protections some states now give consumers?

That’s what happened in the banking business, where credit card lenders
used federal regulation to preempt consumer-protection laws in states
such as Pennsylvania 30 years ago.

The card business grew like crazy for the next 25 years, but the bill
for that is about to come due, with record card losses threatening Bank
of America Corp., JPMorgan Chase & Co., and others now that
Americans have borrowed more than they can pay.

Insurance activists like Douglas Heller of Consumer Watchdog worry that that’ll happen in their industry, too.

Stakes are high. Kanjorski has attracted more campaign money from
insurance people – a half-million dollars, by Heller’s count – than any
other House member in the last two election cycles.

Contact staff writer Joseph N. DiStefano at 215-854-5194 or [email protected].