Bucco, I don't disagree with you on your suggestion. But I think we're getting our politics tangled up with trying to understand what alternatives are available to prevent a recurrence of the financial crisis we're only now beginning to work our way out of. We shouldn't forget that the ineffectiveness of regulation and oversight of financial institutions, including insurance companies, has resulted in the loss of trillions of dollars of worth owned by individuals and companies. Avoiding a recurrence of that kind of problem is what needs to be addressed.

Limiting out discussion to the initial post--what needs to be done to regulate the insurance industry? You say that other solutions should be tried before we revert to federalization to resolve the problem, regulate the insurance companies. I'd certainly be willing to consider such alternatives...but what are they?

Large insurance companies purposely create individual state subsidiaries to write policies in individual states. The states have a wide range of regulations and regulator abilities to properly insure the financial stability of each of those "state subsidiaries". Their principal purpose is to assure that the state insurance subsidiary has the financial wherewithal to pay claims, presumably to residents of that state, when they are presented. Some insurance companies are incorporated in particular states, even though they do business nationally or even internationally, because a particular state has favorable regulations or weak regulatory oversight.

In addition to any regulatory powers of the individual states, a private company A.M. Best, provides "risk ratings" of insurance companies. Typically, risk ratings of the parent company are provided by both A.M. Best as well as the other national credit rating agencies like Standard & Poors or Moody's. Obviously, the credit ratings provided by all those "experts" were woefully lacking in the proper recognition of the financial stability of insurance companies like AIG and others effected by the recent financial crisis.

As evidenced by the events of the last year or so, this entire system of regulation and credit rating failed. This should lead one to believe that some change in regulation and a system of financial transparency is needed to prevent recurrences of what we saw happen to AIG as well as other financial institutions that in essence wrote "insurance policies" in the guise of financial derivatives--credit default swaps written by banks and investment banks are a good example of totally unregulated "insurance policies".

So, following on with your criticism of the proposed "federalization" of regulation of the insurance industry, I ask again--what other alternative is there? It seems unwise to me to have the federal government regulate banks, thrifts and other "bank-like" institutions, leaving the insurance companies which also act like banks in many ways, to be regulated by individual states. In the last couple of decades the financial services industry has changed dramatically and become a muti-national industry with real "fuzziness" in the types of products and risks assumed by companies in that industry.

Should we separate the regulation of insurance companies from that of other financial institutions? Should we continue to attempt to regulate the insurance industry using a system that dates back to the 1930's? In an industry that has become significantly amalgamated in recent years, would that present too great an opportunity for problems to "fall thru the cracks"?

Again I ask, if not federal regulation which integrates regulation of insurance companies into the oversight of other financial institutions--then what? What are the other solutions you suggest be considered?

I'm not expecting you or anyone else on this forum to be able to come up with a better alternative by themselves. But maybe someone else, an academic, a politician, a pundit...anyone, might have an alternative to more federal regualtion. If anyone can find real suggestions--not just the "no, more federal regulation is no good"--please enlighten all of us here.