Justin Levine, who considers himself too good for comments, has a nevertheless interesting post on the difficulty of being a free market advocate these days, at least when discussing financial markets. I don’t know where I come down on the bailouts, but I do know enough to take issue with his comments about insurance:

Here is an illustrative example: Like many states, California requires you to purchase car insurance in order to drive a car.

I trust that by “many,” Justin means “nearly all.” I’m only aware of three states that don’t require drivers to carry liability insurance (NH, VA and WI) and one of those three (VA) requires non-insured drivers to pay the state an annual driving-without-insurance fee instead. The reason is clear: driving without financial responsibility is irresponsible, as it puts others at risk, not just you.

However, there is no socialized car insurance industry.

Ever try running an auto insurance company?

You have to purchase the insurance from private players who are usually able to set their own prices and terms for their product.

I trust that by “usually,” Justin means “never.” Auto insurers in California can’t sell any insurance product without filing the rates and forms with the Department of Insurance, who in turn has broad power to reject any rate they consider either too high or too low (and yes, rates do get bounced for being too low; this is part of the reason why even though A.I.G. is borderline-insolvent, its member carriers aren’t). And in the case of auto insurance, they can’t even approve a rate if they want to unless it is based entirely on the driver’s safety record, number of miles driven annually (which insurers currently aren’t even allowed to verify, though this will soon change under PAYD), the number of years driving experience, and other factors the DOI has already approved by regulation, in that order. And don’t even get me started on the Good Driver law, which all but commits the insurer to covering a particular driver “till death do us part.”

Had it not been for this law, there would have been many periods in my life where I would not have bought insurance (because my car was a worthless piece of junk, and my personal assets weren’t all that much either — so it made economic sense for me to forgo insurance and risk the costs associated with a potential accident).

So now that you have a government law/regulation forcing you to buy a product from a private industry, does it make more sense to have the government thoroughly regulate the prices and policies of that industry to make sure that the consumer is protected from predatory market practices that the government has encouraged with its initial regulation? I say yes. For this reason, I’m glad that there is a California Insurance Commissioner that helps regulate the industry.

There are many good arguments for regulating the insurance industry, but the fact that a few discrete types of insurance are mandatory under certain circumstances is not one of them. Unless, of course, Justin is seriously contending that the DOI should have authority to regulate auto liability insurance, but only up to the amount required by law, while allowing pure capitalism for all risks above the minimum amount, along with laissez-faire comprehensive and collision coverage, regulation-free homeowners insurance (routinely required by lenders, but not by the government), free-wheeling health insurance (the DOI doesn’t regulate this in California, but the DMHC does, and somebody regulates it in every state), untrammeled malpractice insurance, and no regulations on almost any other kind of insurance except maybe mortgage insurance, and then only to prevent lenders from deliberately choosing policies with exceedingly high rates since they know they won’t have to pay anyway.

But I know many who would say no. They seem to argue that as long as there is “competition” among several insurance carriers, the law forcing you to buy insurance doesn’t constitute enough of an unfair market distortion for consumers such that it warrants further government regulation. [There are also a few nitwits who would actually argue that I can just make the “free market economic choice” to not drive in Southern California. Those people and I are simply on different planets when it comes to arguing economic policy.]

Not sure why those who oppose mandatory liability insurance in principle are not a completely different planet than those who openly admit they would have chosen not to carry liability insurance themselves, but if anyone who isn’t too good for comments can think of a coherent explanation why, I’d love to hear it.

Full disclosure: I work for an auto insurance company.

Carolyn Elefant links to some lawbloggers questioning whether the Fed had the legal authority to pull off a bailout that is, in effect, a takeover rather than just a loan. Apparently there’s some question as to how much federal law allows the Fed to do. To the extent that it doesn’t clearly preempt state law, there could be issues under state law, as well. Taking over even a 10% interest in an insurance company, let alone a majority stake, generally requires going through a lengthy approval process with insurance regulators in multiple states. In theory, I suppose it is possible that the Fed called all applicable regulators (not only in New York, but in every other state in which at least one A.I.G. subsidiary is either domiciled or commercially domiciled) in the middle of the night to gain approval for the deal in record time. In practice, don’t bet on it.

Full disclosure: I work for an insurance company that competes with A.I.G. I speak for myself, not my company or anyone else.

Fuller disclosure: I now own A.I.G., and I’ll bet you do, too.

UPDATE: Meanwhile, Sir Hopenchange has strong opinions on a company whose name he can’t even get right. One side of me says “no big whoop,” if I weren’t an insurance geek I probably would have assumed the “I” stood for insurance, too. The other says roll with it, let’s milk every dumb think the Obamessiah says for all it’s worth. If this bozo gets elected, who will taxpayers end up bailing out next? Geeko? All57states? ShitiBank? Toilet and Douche? Arton, Barton, Parton and Wellsfargo? Countryside? Or perhaps their sister corporation, and the world’s most undermotivated subprime lender, Countywide?

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.

Insty says that’s just mean,” in response to Michael Silence asking “Which is falling faster? Crude oil prices? Wall Street? Or Joe Biden’s relevance?” Nah, that’s not just mean, it’s also ungrammatical. A three-way comparison calls for the superlative fastest, not the comparative faster.

Oh yeah, and it’s kinda mean, too, as it gives Biden the false hope that he ever had relevance or, like crude oil and Wall Street, may someday acquire it in the future. Grammar aside, that is just mean.

R.I.P.

Center-left professional blogger Kevin Drum linked this morning to a disturbing article in today’s Los Angeles Times about political shenanigans in the City of Vernon.

Vernon, it seems, has a total population of 91, consisting of 25 households. According to the LA Times, everyone who lives within the city limits is a city employee of some sort, and most live in city-subsidized housing. The city hasn’t held a contested election in twenty-six years. The most recent attempt to hold one failed:

Twenty-five years after its elected officials last had a contested ballot, eight strangers took up residence in the tiny city four miles south of downtown Los Angeles. Last month, after just a few days in town, three of the newcomers filed petitions to run for City Council in the April 11 election.

Within days, city utility trucks had turned off their power. The building they shared was slapped with red tags by inspectors who said the property was “unsafe and dangerous” as a residence. Strobe lights flashed through their windows. They and some of their relatives were placed under surveillance. Shortly, city police and other officials drilled holes in the locks and evicted the would-be office-seekers.

Having deprived the interlopers of city residence, Vernon officials on Jan. 27 disqualified them from the ballot.

To be fair, Vernon city officials claim that the evicted candidates were part of a plan by a notorious corrupt outsider to, in essence, mount a hostile takeover of the city. That’s a plausible claim; a city with five dozen voters in which the municipal officials are effectively lifetime office-holders and have more or less unchecked authority to dispense the city’s tax revenue to themselves is a very good candidate for a hostile takeover.

But surely that misses the point: it’s not clear to me that there should be, in the United States, cities with unelected “governments” that are accountable to nobody, in which every voter who could hold them accountable are in some fashion dependant upon them for their livelihood, their home, or both. If the situation in Vernon is remotely as the LA Times has described it, the City is a farce: a Potemkin democracy in which the legal forms are being observed in order to frustrate their intent.

Surely there must be something California can do to shut them down.

Is there some way we can delay the release of Xrlq 3.0 by about a month? Being the 300,000,000th American would be a pretty cool feather for his^* cap, but I’m not sure a 10-month pregnancy is a realistic option even if Mrs. X could be persuaded to go along with it. So it looks like we’re out of the running, but if you want your next kid to be Baby 3,000,000, get cracking.

^*The neuter gender includes the feminine and masculine, the masculine includes the feminine and neuter, and the feminine includes the masculine and neuter, and each includes corporation, partnership, or other legal entity when the context so requires. The singular number includes the plural whenever the context so requires. IOW, no, I don’t know the sex of Xrlq 3.0, and won’t for some time.

Rumsfeld has announced that two US brigades, around 7,500 [-edit] men, are being pulled out of Iraq, or technically simply not rotated in.

I stole the preceding link from McQ at QandO who also notes this:

The United States has not discussed basing American troops in Iraq, and would do so only following negotiations with the new Iraqi government, Defense Secretary Donald H. Rumsfeld said here today.

No doubt we will have long-term, if not permanent, bases in Iraq. One of the strongest arguments for me in favor of the invasion of Iraq was that that country is literally in the heart of our enemies’ territory. When we have to go to war against Iran or Syria it will be much easier to do so from the country right next door.

Question: Is the strike in New York over?
Answer: Maybe.

Question: If Reagan were mayor of NYC would all the strikers be out of jobs?
Answer: Maybe.

• A California judge has fined a couple $75,000 for being bad neighbors. “Neighbors said dozens of vehicles, some of them stolen, would be left for weeks on the street for Michael Dever’s illegal auto repair business. They also said people visiting the home sometimes urinated in public or smoked marijuana.”
• Uranus has two rings now. Before it had just one.
• From the AP: “The California Supreme Court on Thursday overturned a $14.8 million fine the state imposed on R.J. Reynolds Tobacco Co. for illegally doling out free cigarettes at a beerfest, a biker rally and other public events.”
• The House Intelligence Committee has figured out a plan to investigate the various wrong-doings of one Randy “Duke” Cunningham.