The fed has loaned American Insolvent International Group $85 billion to keep it from going under. Personally, I think federal intervention to help insurance companies stay afloat takes the whole bailout thing to a whole new level. It’s bad enough for the federal government to play old the “public risks, private rewards” game on companies that are regulated by the federal government. For the federal government to offer the same handouts to insurance companies subject to almost no federal regulation (but regulated to the hilt by the states) is insane. If any level of government is going to do for A.I.G. what the federal government did for federally chartered S&Ls, that level of government should be the one that regulated it, namely its state of domicile, mostly New York. [I know, "mostly" domiciled sounds a bit like "sorta pregnant," but it actually makes sense when you consider that A.I.G. is not a single insurance company but a huge group of them, not all of which are domiciled in the same state.]

On the other hand, with both candidates at the national level fighting to the death over who can be be seen as more pro-regulation of all financial institutions at the federal level, perhaps new federal regulation of the insurance industry is inevitable. I’m not sure that’s a bad thing, at least from the perspective of the industry itself. As any gunny old enough to remember life before FOPA can attest, a patchwork of laws across the country can make life extremely difficult for anyone who doesn’t want to spend his whole life in a single locality. Insurance is probably the one industry that gets it worse than guns, with hardly anything not being mandated in one state and prohibited in another. An optional federal charter (OFC) allowing insurers to operate under federal regulation in lieu of the states, as national banks have done for almost as long as our country has existed, would certainly allow national businesses to run much more smoothly, and to the extent it encourages regional carriers to compete nationally, I have to think it could help consumers, as well. So if the feds really want to get in the business of bailing out insolvent insurers, in exchange for at least allowing insurers to operate under federal rules instead of state ones, I’ll take it.

Full disclosure: I work for a national insurance company that competes with A.I.G. I don’t know if my company supports OFC or not. I speak for myself, not them. FWIW, I myself would almost certainly not, however, as allowing a national company to operate under one set of laws rather than 54 (57?) would make my work about 1/50th as lucrative as it currently is.