NU Online News Service, May 15, 9:11 a.m.EDT

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WASHINGTON–The chairman of a key subcommittee of theHouse Financial Services Committee today said he intends to movequickly to impose direct federal oversight of insurance, startingwith a system to regulate systemic risk.

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Rep. Paul Kanjorski, D-Pa., chairman of the Capital MarketsSubcommittee of the House Financial Services Committee, made hiscomments as he opened a hearing on what future role the federalgovernment should play in insurance.

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"I will act quickly, yet deliberatively, in developing a newgame plan to involve the federal government in direct oversight ofthe insurance industry," he said at the hearing.

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At the very least, said Mr. Kanjorski, the plan should establisha legislative regime for monitoring the systemic risks of failingnondepository institutions.

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Rep. Kanjorski also made his comments in an appearance on CNBCbefore his committee met.

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He said he was acting based on the need to bail out insuranceconglomerate American International Group.

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At the hearing, he said that "AIG taught us that the business ofinsurance has become complex and no longer fits nicely in the stateregulatory box."

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He said many insurance products are either of nationalimportance or uniform in nature.

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"We must therefore consider whether to regulate these elementsof the industry nationally," he said.

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The reaction of members of the committee was mixed.

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Rep. Jackie Speier, D-Calif., the newest member of the committeeand a strong advocate of the state insurance consumer protectionlaws, said she opposed federal regulation.

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She called federal regulation "seriously misplaced andmisguided." She also argued that AIG's failure was due to itsinvestment in derivative transactions, which she said wereregulated by the Office of Thrift Supervision.

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She said the OTS "was largely asleep at the switch."

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But Rep. Brad Sherman, another California Democrat, voicedsupport for Rep. Kanjorski.

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"I dream of the days when consumers complained of being deniedinsurance products on a timely basis" because of state regulations,he said. "Today those problems seem quaint."

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