While Larry Ribstein is shadow boxing with SOX II, I am looking at today's interest rate cut by central banks around the world and wondering how long it will take before talk of a new global financial services regulator begins to gain traction in the US.
We in the US tend to be a tad self-absorbed, so we see Lehman failing and other U.S.-based investment banks floundering, and we reflexively think about domestic solutions. In the meantime, the rest of the world is absorbing the shock waves emanating from New York and thinking that a global financial system may require supranational oversight. The idea is already being promoted in England and elsewhere.
Will it catch on here?
It's not surprising that the global coordination described by David was initiated by central banks, not elected politicians. Civil servants are more inclined to take a long view and less inclined to play to local interests. My hunch is that U.S. politicians will remain focused on domestic solutions (is there any doubt that SOX II is already being drafted?), but the SEC, the Fed, and other domestic agencies will step up their efforts at global coordination, encouraged by the IMF, the World Bank, and other existing institutions. These things take time, but the drift in the direction of a new global financial services regulator is already perceptible.
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1. Posted by Elizabeth Brown on October 8, 2008 @ 10:42 | Permalink
Until the US has a federal agency regulating insurance and imposing uniform standards on state insurance regulators, it will be practically impossible to achieve meaningful global coordination between the US and the rest of the world on insurance - one of the major financial services sectors. The recent crisis has highlighted the importance of such coordination, particularly for hybrid products, like credit default swaps, which can be classified as either insurance or securities or both. The International Association of Insurance Supervisors was only created in 1994 and its standards are non-binding. It has over 190 members from only about 140 countries because each individual state in the US is a member.
The 50 states cannot even agree on uniform standards within the National Association of Insurance Commissioners (NAIC), the US body that is supposed to coordinate state insurance regulatory efforts. Trying to get them to agree on global standards or coordination efforts is like trying to herd cats.
The Insurance Information Act of 2008, which Congress was considering but hasn't passed yet, would give the USTR the power to negotiate global insurance standards in international agreements that could then be imposed on the states. It provides a back door way of effectively regulating insurance at the federal level. If this bill isn't enacted, USTR lacks the authority to enter into international agreements that would require the states to modify their insurance standards. Right now the states are not authorized to negotiate on binding international insurance standards in forums like the WTO. Certainly, they could be authorized to participate in international negotiations, but they are unlikely to seek more uniform standards at the global level than they have sought to date within the United States.
2. Posted by art byrne on October 8, 2008 @ 19:17 | Permalink
In 1944 ihe s. ct. of the u.s. held that insurance was subject to federal law. Congress reversed that. This is not a simple matter.
3. Posted by Elizabeth Brown on October 9, 2008 @ 16:58 | Permalink
Mr. Byrne, Changing the law is simple. Congress can repeal the McCarran-Ferguson Act which let the states regulate insurance. Whether doing so is a good idea is certainly open to debate.
4. Posted by artbyrne on October 26, 2008 @ 13:37 | Permalink
do you block publications?
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