Democrats Moving Both Directions on Financial Regulation

For those old enough to remember the Rex Harrison version of the film "Doctor Doolittle," the Democrats in Congress are starting to look like the "Push-Me Pull-You" beast on matters of financial regulation. For those who can only recall the Eddie Murphy remake, said animal was a llama of sorts with a head at either end. Quite how it cleared its bowels was not explained but it could explain why the Dems are full of something on these regulations.

Beginning on the health insurance side of finance, the Democrats finally got miffed at the insurance industry which put out a deceitful "report" that claimed reform would send prices through the roof. The report was so one-sided that PricewaterhouseCoopers, the accountants that put it together, said it was nonsense. So, the Senate Finance Committee finally passed a health insurance reform bill. Then, they went a step further and are now threatening to get rid of the insurance industry's exemption from federal anti-trust laws.

Thanks to the McCarran-Ferguson Act from the 1940s, insurers are allowed to share pricing and other information that would be criminal for any other industry. In addition, insurance in the US is regulated at the state, rather than the federal, level. And since politicians in state races are more easily bought, insurance companies have a lot of influence over their own regulators. Wisely, Democrats in the Congress might just bring them under federal law.

Meanwhile, over on the banking side, the very same Democrats are debating whether the federal government will allow states to impose regulations on banking entities that are more stringent than those legislated in Washington. In other words, they want to decentralize the situation because they believe some states will be tougher on the banks than Uncle Sam will.

While the two industries are not identical, they are both part of the financial backbone of the country. For the sake of legal coherence, the Dems can't have it both ways. The current arrangement suffers from the exact same incoherence, just a mirror image of what they propose. Either banks and insurers are federally regulated, or they are regulated at the state level. The Democrats seem not to understand that their proposals amount to nothing more than regulatory musical chairs.

At least, the Republicans are consistent in not wanting any regulations that are meaningful. They are horribly wrong, but consistent.

© Copyright 2009 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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