Members of the Senate Banking Committee clashed today during a long hearing on insurance regulation reform.
Sen. Richard Shelby, R-Ala., chairman of the committee, asked Alessandro Iuppa, president of the National Association of Insurance Commissioners, Kansas City, Mo., whether regulators in all states really have the ability to regulate complex financial products such as derivatives.
But Sen. Paul Sarbanes, D-Md., the most senior Democrat on the committee, emphasized that at least one reform proposal, an optional federal charter bill that was introduced in April, might override state consumer protection regulations.
The idea of federal law pre-empting state consumer protection regulations “raises some interesting hypothetical possibilities,” Sarbanes said. “These should be examined very carefully, very thoroughly.”
Sarbanes noted efforts by a major federal bank regulator, the Office of the Comptroller of the Currency, to pre-empt state consumer protection laws dealing with topics such as mortgage disclosure standards.