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CEI ANALYSIS OF GEITHNER INSURANCE PROPOSALS

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CEI ANALYSIS OF GEITHNER INSURANCE PROPOSALS

CEI ANALYSIS OF GEITHNER INSURANCE PROPOSALS

Proposals Mix Good, Bad Ideas

Washington, D.C., March 26, 2009—Testifying before Congress today, Treasury Secretary  Timothy Geithner will propose broad new
federal oversight for a variety of financial services, including
insurance.  Analysts at the Competitive
Enterprise Institute, a leading free-market think tank, praised some aspects of
Geithner’s insurance-related proposals and criticized others.

“Federal
oversight of insurers makes sense and, most probably, there’s little harm in a
system that excludes the smallest insurers from federal oversight,” said CEI Senior Fellow Eli
Lehrer. “I’m worried, however, that making the system
mandatory for large firms and closed to small ones, as Secretary Geithner
intends to propose, will create a split estate in the insurance industry.  If the Federal Government says that certain
insurers are ‘too big to fail’ and others are not, then it gives an enormous
advantage to certain private business over others. And that’s a bad idea.”

Lehrer
argues that, to be effective, any system of federal regulation of insurance
must preempt state-level rate regulation. “Rate regulation initially came into
being as part of solvency regulation. If the federal government wants to
oversee solvency, then it has to oversee rates as well. There's no way around
that.”

Read ongoing commentary on financial and insurance issues @ CEI’s blog,
OpenMarket.org.

Read more from Eli
Lehrer
.