Bring Back Glass Steagall

I have to wonder why people in life insurance worry about excessive government regulation.

The recent example of the Minerals Management Service’s efforts to turn the Gulf of Mexico into the Dead Sea is just one example of how bad a joke Federal regulation has become. That agency should adopt Sarah Palin’s old campaign catchphrase , “drill, baby, drill,” as its official motto. Its ability to protect the nation’s vibrant shorelines makes Tweedle Dee and Tweedle Dum look bloody brilliant.

The Food and Drug Administration and the Mine Safety and Health Administration are two other bureaucracies that often seem in bed with the industries they are supposed to watch.

And don’t get me started about the U.S. Department of the Treasury. In 2008, executives at the floundering AIG were in the process of negotiating down the company’s bad debts with its banks at an estimated 40 cents on the dollar, according to a report from Bloomberg News. Then Treasury stepped in and offered to pay off every cent of that debt- with $13 billion of our tax dollars.

Congress is now trying to reconcile two different bills that would establish regulations that would affect insurance companies. The Senate version would create an Office of National Insurance as part of the U.S. Treasury, which would make recommendations to Congress and the White House about regulation in the industry.

Frankly, I’m not frightened.

Rather than another bureaucracy, we should return to the days of the Glass Steagall Act, which banned commercial banks from joining forces with insurance companies or brokerage firms or from acting as investment banks. The purpose was to protect depositors from risky security trades as well as from being cross-sold products that might not be in their best interests.

Glass-Steagall worked not by imposing a regulatory bureaucracy over banks, insurers and broker -dealers but rather by simply banning certain types of mergers and business dealings among them.