WASHINGTON–The economic problems created by poor regulation of the bond insurance industry are evidence that optional federal chartering of insurers may be needed, a key House subcommittee chairman said yesterday.

Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee of the House Financial Services Committee, made his comments in a signed article in a Capitol Hill newspaper. He aired his views in advance of a Thursday hearing dealing with state oversight of bond insurers.

Rep. Kanjorski wrote that the “widespread effects of the bond insurers’ ratings downgrades…provide the strongest argument yet for why a federal insurance regulator may be needed.”

At the same time, New York Attorney General Andrew Cuomo voiced his own criticism of the industry, saying that a decision by ratings agencies to change their evaluation methods “is too little, too late.”

In saying that his agency will continue its “active” investigation of the mortgage industry and the role played by the ratings agencies in the “mortgage meltdown,” Andrew Cuomo charged that both “S&P and Moody’s are attempting to make piece-meal changes that seem more like public relations window dressing than systemic reform.”

The upcoming hearing that Rep. Kanjorski’s committee is due to hold concerns the impact on the municipal bond market of bond insurers’ decision to expand their business to include guarantees on structured credit insurance products.

His panel has the primary oversight over financial services regulation in the House and would be a potential starting point for congressional action creating an optional federal charter.

In a signed article in Roll Call published yesterday, Rep. Kanjorski said that while “I long have seen the potential benefits that such a charter could bring to certain sectors of the industry, I have remained hesitant to view this idea as the solution to all of its problems.”

But, he said, “in addition to overseeing insurers, a federal regulator could have the important mandate of monitoring national financial stability.”

He noted the positive impact of the Terrorism Risk Insurance Act, which was recently extended for 7 years, noting that, “after Sept. 11, a lack of terrorism insurance coverage halted construction projects. We passed the terrorism reinsurance backstop to fix this problem.”

He said the problems states and local governments are having in getting bonds insured at a reasonable rate is impacting the overall economy.

“At the very least, the federal government should collect data on the insurance industry and have the information to foresee the national impacts that the insurance industry has on the economic well-being of our country,” he said.

While the bond insurance industry appears “deceptively small,” Rep. Kanjorski said, “the ricocheting economic effects of ratings downgrades demonstrate just how important it really is.”

“Because we need better federal oversight of the insurance industry, I will continue to hold hearings and work toward regulatory reform,” he added.

During these proceedings, “I expect discussions about creating a federal regulator to continue,” he said. “It clearly is one potentially effective solution to a very complex problem.”

Regarding Mr. Cuomo’s probe of rating agencies and their role in the subprime problem, Anthony Mirenda, a Moody’s spokesman, said, “We don’t think it is appropriate to discuss conversations with government authorities.”

He said the firm had received inquiries from “a number of government agencies.”

Mr. Mirenda explained that Moody’s at this point had not made any changes in rating methods but had asked for comment to explore possible changes with the market.

For its part, Standard and Poor’s issued a statement regarding its decision to downgrade certain bond insurers that said: “The actions we are taking today are meaningful and will be important measures to serve the capital markets.”

The statement added, “We are taking these steps after seeking input from market participants, including investors, issuers, central bankers and regulators around the world.”

S&P said its actions, “and those that we will continue to pursue, are making a fundamentally good process better.”

“We look forward to continuing our dialogue with market participants and will introduce additional actions as needed to best serve the capital markets.”

Fitch, which was not mentioned by Mr. Cuomo, said Friday it “has been further reviewing” its modeling approach to account for the perceived risk imbedded within more recent vintage mortgages from 2005-2007.