Birnbaum Calls Paulson Comments Orwellian

A consumer advocate is blasting efforts by U.S. Treasury Secretary Henry Paulson to blame state regulators for the events that led to the takeover of American International Group Inc.

Birny Birnbaum, an Austin, Texas, consumer advocate who receives funding from the National Association of Insurance Commissioners, Kansas City, Mo., to represent consumers in NAIC proceedings, made the remarks here at an NAIC-consumer liaison session at the NAIC’s fall meeting.

“Secretary Paulson yesterday claimed that AIG was a classic example of the need for a federal solution,” Birnbaum said. “To be polite, Paulson’s claims are Orwellian in nature.”

Birnbaum said he believes Paulson is making “aggressive attempts” to pre-empt state insurance regulation, and he said the political use of the recent problems at AIG, New York, is “even more shocking.”

Birnbaum called on the NAIC to “quickly issue a resolution opposing the Paulson plan.”

The Paulson plan is “flawed and does nothing to help consumers, Birnbaum said.”

Paulson’s plan to help financial institutions by buying troubled assets will work only if the government pays too much for them, rather than paying what the assets are currently worth, Birnbaum said.

The government should be using the money to help consumers restructure their mortgage loans rather than bailing out big business, Birnbaum said.

But state regulators should improve their own operations by adopting a legally binding conflict-of-interest policy for commissioners and by improving the NAIC’s public meetings policy.