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December 03, 2008 at 10:53 AM
Congress should prevent companies receiving help from federal aid programs from competing unfairly with companies that are not taking the money, a large trade group says.
The American Insurance Association, Washington, is making that case in a letter it sent to Congress Tuesday.
AIA President Marc Racicot, the signer of the letter, asks “that government ownership of private companies does not produce regulatory policy at the state or federal level that gives those institutions a marketplace advantage over their competitors.”
When an insurer receives federal aid, the government must act to ensure that providing this capital is not used for unintended purposes.
Using federal capital to take market share from financial institutions that are accessing private capital at market rates would create “a substantial risk of market distortion,” Racicot writes in the letter.
“Congress must exercise its oversight responsibility to ensure that the limited purposes of these initiatives do not result in outcomes that distort private markets and create conflicts with the government’s role as market regulator,” Racicot writes.
“There is a significant risk that the provision of subsidized government capital will perpetuate the view among companies that access to that capital is essential to keep pace with market competition,” Racicot adds.
Racicot refers directly in the letter to the Federal Reserve system’s “intervention with American International Group,” Federal Deposit Insurance Corp. initiatives, and programs set up under the Emergency Economic Stabilization Act, such as the Treasury Department’s $250 billion Capital Purchase Program.
