{Patricia A. Borowski, Senior Vice President, PIA National (Professional Insurance Agents Association) explains the effect of the Gramm-Leach-Bliley Act (GLBA) of 1999 during the Clinton administration}.
The significance of this act was to merge the securities and insurance industries and regulate them through the Federal Government. Prior to this insurance was regulated almost entirely by individual states under the McCarran-Ferguson Act (15 U.S.C. § 1011) of 1945. Although (GLBA) claimed to not interfere with State's rights to regulate insurance, under McCarran-Ferguston Act, it forced states to allow Banking/Securities and Insurance companies to meld services. Prior to this states did not allow insurance to be sold in banks and/or by securities brokerage houses. The reason was because insurance companies were limited to making very safe investments. The investments of banking and securities were considered too risky. Also, if these risky ventures failed, and they were mixed with insurance, the failures would bring down the insurance companies. Additionally, it was thought a crash of banking or securities would also create a run on the insurance industry. Since states receive revenue through fees and taxes on insurance (provided by the McCarran-Ferguson Act) such an event could drastically impact the finances of the states regulating insurance companies.
It should be noted that it was the investment side of AIG which claimed to be in need of, and was given, a bailout. In light of this shouldn't we be considering a repeal of the Clinton Administration's Graham-Leach-Bliley Act and return to a seperation of Banking/Securities and the Insurance Industry?
by The Boston Tea Party reporter -=Glenn Fannin=-
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