A House bill that would create a federal office of insurance information stalled Wednesday amid the nation’s growing financial crisis.
A congressional aide familiar with the situation said the Democratic leadership pulled the bill (HR 5840) from floor consideration Wednesday because Rep. Jackie Speier, D-Calif., objected to it. Speier, one of the primary opponents of the legislation, had not "taken the time to understand" all the changes that had been made to address the concerns of consumer advocates and other groups, the aide said.
Consumer advocates had argued that this week’s $85 billion federal bailout of insurer AIG was necessary because the federal government has been lax in its regulation of the financial-services industry. But the House’s measure would only weaken federal oversight, they said.
"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," said California nonprofit Consumer Watchdog in a letter to bill sponsor Paul E. Kanjorski, D-Pa.
Speier said the bill was nothing more than a "fig leaf" for an effort to establish a national insurance regulation system and vowed to oppose it, maintaining that the laws of California protected consumers well.
The aide said, however, that if an insurance information office had been in place, the outcome of the AIG situation might have been better.
There probably is not enough time this year to move the bill, the aide said.
The legislation is intended to help coordinate state laws with international trade agreements. Proponents say the lack of federal coordination of insurance regulations hinders the entry of foreign firms to the U.S. insurance market, because they must contend with more than 50 regulators at the state level. The situation also impedes U.S.-based firms from competing abroad, bill proponents say.
The bill would require the office to establish policy on international insurance matters and ensure that state insurance laws fall in line with international agreements.
The office, which would be part of the Treasury Department, would also advise lawmakers and the White House on insurance issues based on data collected by state regulators, including financial and market conduct information.
Opponents of the bill say it is the first step toward creation of an optional federal charter, an issue that divides the insurance industry. Such a charter would allow insurers, agents and brokers operating in more than one state to opt for a federal regulatory and oversight system that would parallel state systems.
The insurance industry says the AIG bailout only heightens the need for the bill. Frank Keating, president of the American Council of Life Insurers, called on Treasury Secretary Henry M. Paulson Jr. to immediately create an Office of Insurance Information in the wake of the financial crisis.
"The events of the past several days have underscored dramatically the need for efficient and effectively coordinated regulation of the U.S. financial services industry," Keating wrote Wednesday in a letter to Paulson.