New York's insurance regulator told a congressional oversight hearing today that it "would be a broad misunderstanding, bordering on inappropriate," to view the American International Group liquidity problems as an argument for federal regulation.

Eric Dinallo, New York insurance superintendent, made his comment at a House Committee on Oversight and Government Reform hearing on the events leading to the government bailout of AIG.

Mr. Dinallo later said that "it is important to have the states in the solvency business," and that while the states have been "clunky" on other issues, they've done very well at insurer solvency regulation.

Mr. Dinallo added that lawmakers may want to "revisit" the Gramm-Leach-Bliley Act, passed in 1999 to succeed the Glass-Steagall Act. "The "supermarket of financial services" it created can cause problems for the whole place "when something smells in aisle six," he said.

Regarding revelations that after the $85 billion AIG bailout deal was sealed with the Federal Reserve Board, top AIG executives went to a retreat at a posh California resort, Mr. Dinallo said, "I think there are some regrettable headlines" in the reports of AIG executives spending thousands at a resort on spa, etc.

But, he said, a worse scenario would be AIG executives and underwriters ending up in a "runoff" situation.

So while there "is some profligate spending" in those reports, the concept behind it "would not have been a crazy corporate decision," Mr. Dinallo said.

In advance of Mr. Dinallo's remarks, Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, blasted AIG management for going off and "wining and dining at one of the most exclusive resorts in the nation," St. Regis in Monarch Beach, Calif., less than one week after securing the government bailout.

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Dinallo Tells Congress Insurers Don't Need U.S. Regulation

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