When he unveiled his Blueprint for a Modernized Financial Regulatory Structure in March of this year, Treasury Secretary Henry Paulson said it was a long-term vision that would not be implemented soon.

At a July 10 hearing before the House Financial Services Committee, Paulson sent mixed messages. First Paulson said the changes he’s proposing should be implemented quickly. But then at another point during the hearing, Paulson said bringing about changes would take time.

“We’re not saying take forever, but we recognize the fact that the regulatory structure hasn’t been changed in a long time, and the fact that we don’t have these tools means that it’s not going to be easy.” The Treasury Blueprint recommends the creation of an optional federal charter for insurance companies, similar to the current dual-chartering system for banking.

The Treasury Blueprint lays out in great detail how the oversight of the business of insurance will be “prepared” by federal authority (under the direction of the Secretary of the Treasury) to be formally organized into an integrated system of federal financial oversight governed by federal financial services law. The Treasury report spells out that these steps will be taken so that in the next stage, the substance of the business of insurance and insurance products can be fully integrated into a homogenized, singular financial services industry.

What It Means to Agents:  What is being proposed by Treasury is the federalization of insurance regulation. Treasury’s report openly states that establishment of an Optional Federal Charter and a federal commissioner of insurance are merely the first steps toward this goal.

Another step advocated by Treasury to “prepare” the insurance industry for federal control (as the Treasury report puts it) was creation of an oversight office within the Treasury Department. Weeks after Paulson made that recommendation, Rep. Paul Kanjorski (D-Pa.) introduced his bill creating the Office of Insurance Information, giving the Treasury Secretary power to preempt state insurance laws.

July 16, 2008