Two recent news stories–dealing with banking and the airlines–makeme wonder more than ever about the wisdom of letting Uncle Samregulate the insurance industry outright. State oversight has itsfaults, but I fear consumers could be worse off if states arestripped entirely of their authority to hold insurers accountablefor poor market conduct.

On Dec. 4, the U.S. 2nd Circuit Court of Appeals in Manhattanupheld a lower court ruling that the Comptroller of the Currencyhas exclusive authority over federally-chartered banks.

Washington initiated the legal challenge when then New YorkAttorney General (now governor) Eliot Spitzer launched a probe intothe lending practices of three national banks, and indicated he hadevidence they had violated state civil rights laws. The proberevolved around whether the banks were charging higher interestrates on mortgages to minorities.

Sorry, Uncle Sam's courts said, but states do not have the rightto prosecute national banks that might be cheating their customers.I have not heard whether the new AG, Andrew Cuomo, will appeal. Buteven it he does, I believe it would prove futile.

Similarly, the Air Transport Association, representing majorairlines, is seeking an injunction from a federal district court inAlbany to prevent New York from enforcing its mandate that airlinesoperating in the Empire State provide water, snacks and workingtoilets for passengers delayed on planes for over three hours.

The rules, signed into law by Gov. Spitzer and due to takeeffect Jan. 1, were passed after last winter's debacle in whichpassengers were stranded on frozen runways for hours duringweather-related delays, without being provided with the most basicamenities.

The rules certainly sound reasonable enough, but the airlinesare appealing on the grounds that states lack any legal authorityto regulate them.

What disturbs me most is that neither the national banks nor theairlines offer any defense of their alleged misconduct. Even if thebanks are discriminating against minorities, or the airlines areholding their passengers hostage, the ISSUE here, they argue, isthat they are immune from state oversight, not the merits of theirbehavior.

I understand the legal and jurisdictional concepts here. And Icertainly appreciate the problems dealing with 50 state regulatorsand a National Association of Insurance Commissioners that operatesat a glacial pace.

But I also don't entirely trust the federal government inWashington to protect me against local threats.

Some would say the best compromise would be the approachadvocated by the Independent Insurance Agents and Brokers ofAmerica, which backs the establishment of federal standards forstate regulators to follow.

That way, you would maintain the uniformity required to overseethe industry economically, without sacrificing the attention alocal regulator would pay to market conduct issues in their ownstate.

But the flaw there is that federal standards would still notgive states the authority to act unilaterally to protectconsumers.

Is the status quo that egregious? Can Washington be relied uponto get the job done if insurers are suspected of redlining orillegal discrimination or bid-rigging?

What do you folks think?