Playing the Percentages
In Washington, everybody wants to go
to heaven, and nobody wants to die. My job is to get something
passed in my lifetime—even if it’s not all that I
I had an opportunity in April to share a drink with a
freshman Democrat on the House Financial Services Committee, a
guy who’d knocked off a longtime Republican
incumbent.(The beer was legal!He was buying!) A former state
legislator, he finds the D.C. experience gratifying but
In the statehouse, he said, “you could have a bill
introduced in the morning, and it could be on the floor the
next day and enacted the next week.Here, it’s all a
The reference point for our conversation was Treasury
Secretary Hank Paulson’s Blueprint for Financial
Regulatory Reform. Among the many proposed reforms is an
Optional Federal Charter for insurers and
producers—marking the first time that any administration
has embraced such progressive reforms.
My new Democratic drinking buddy hadn’t yet decided
whether he supports the OFC, but he knows there’s no rush
to decide.Most observers tend to think that, absent a crisis,
the OFC effort will take years.Meanwhile, all the major
stakeholders breathlessly commented pro and con on the
treatise, with plenty of invective from those who feel they
have the most to lose from a rational, national insurance
regulatory regime—small insurers and agents, and the
state regulators themselves. The National Association of
Insurance Commissioners was particularly vitriolic, its
president sarcastically comparing the OFC proposal to the
federal response to Hurricane Katrina.
The insurance industry does pretty well when it’s
cohesive—passing TRIA, for example, or beating
Hillary’s (first) health care overhaul.But when there are
schisms, gridlock usually follows.
Parts of the industry want a federal backstop for natural
catastrophes while most of the industry does not. Gridlock.
Some wanted to cut a deal for an asbestos litigation
resolution fund. Others did not. Gridlock.
Some want aggressive, preemptive small-group market health
insurance reforms. Others don’t. Gridlock.
When Congress has taken sides on legislation involving major
intra-industry animosity, the votes have come after literally
decades of debate (think of the Gramm-Leach-Bliley Act that
allowed banks to sell insurance).
At The Council, we’re all for the Paulson Blueprint,
and we issued our own press release about how the
administration’s move helps secure the inevitable.Do I
believe that?Sure. We’ve supported the OFC in every
iteration since House Energy & Commerce Committee Chairman
John Dingell, D-Mich., authored the concept in 1992.But can I,
with a straight face, predict its enactment within the
WhatI canenvision in the next year or two, though, is a
shuffling of priorities based on political facts of life.Those
facts include the overwhelming likelihood that Rep. Barney
Frank, D-Mass., will remain chairman of the House Financial
Services Committee, and the ranking Republican member will
still be Rep. Spencer Bachus, R-Ala.Sen. Chris Dodd, D-Conn.,
will still be chair of the Senate Banking Committee (unless
President Barack Obama names him to his cabinet or he moves
over to chair the Foreign Affairs Committee should Sen. Joe
Biden, D-Del., leave), and the ranking minority member will be
Sen. Richard Shelby, R-Ala.
In both of these principal committees of jurisdiction, the
chairmen are progressive firebrands and the ranking members are
conservative, southern Republicans.But consensus reigns,
particularly in the regulatory reform arena. None of the four
have said they support a comprehensive OFC for the entire
insurance industry.Dodd, probably the most sympathetic to it,
has said the politics tilt toward a life-only charter (the
argument being that property-casualty products have more
inherently local, and fewer national, characteristics).