Primus mortgage regulatorus

In yet another sign that the Obama Administration “gets it” they have announced plans to give a single regulatory agency the authority to oversee mortgages and other consumer-oriented financial products. Hurray! Another option would be the creation of a new regulator. Believe it or not, but there is no single regulator for these products (egads!).

There is some discussion of extending the powers of this regulatory body to include insurance products which are currently regulated state by state. This regulatory structure has allowed insurance companies to exploit the situation. For example, waaaaay back in the day when I was licensed to sell insurance, I knew that many insurance companies did not sell insurance in New York state. This was because the insurance companies that were based there lobbied the state insurance regulator to let only New York based firms sell insurance. Hmmm. Less competition is great for consumers, right? The companies have also exploited this odd regulatory structure by applying the full mass of their international operations on to smallish, underfunded state regulators. Imagine AIG vs. North Dakota. The matrix of state regulators also favors large established insurance companies, too. This is because they can compete in multiple states at a time, whereas your local insurance company has a hard time leaving their home state to expand their business elsewhere. The natural outcome of this structure is a very few large national insurance companies. Kinda like what we have…not surprisingly.

Anyhow, I have long felt that the insurance industry could stand national oversight. In all of the regulatory rumblings that have been taking place, I had not heard of insurance industry oversight being on the table – this is potentially a very good thing.

The last major product-area that this agency could oversee is mutual funds – my old stomping grounds. Again, centralizing this regulatory authority in one place would be a good thing (no apologies to Martha Stewart).

Today I will not discuss the various possible shapes this agency could take. I just want each of us to know two things: the Obama Administration understands that this whole entire crisis rested solidly on lax regulation and they are doing something about it. Yay! Once the final shape is presented I will make a post and try and identify the potential strengths and weaknesses of such a structure.

Be well!

Jason