In “Consider cost of deregulation” (October 5), Barbara Ann Radnofsky argues that efforts by Texas legislators to deregulate certain businesses were responsible for many of the difficulties facing Texas today. This is both misguided and inaccurate. It’s too soon to be writing an obituary for the free market. The true failure of this crisis lies with the institutions attempting to regulate themselves out of the mess they’ve made of the economy.
Radnofsky uses AIG as an example of the benefits of a proposed regulatory retrenchment. She claims a government-owned insurance agency could effectively regulate prices and coverage, ensuring a fair and equitable system.
Too much government intervention in real estate markets—via Fannie Mae, Freddie Mac, CRA, and artificially low Federal Reserve interest rates—caused the boom and bust cycle. It’s the real estate investments within AIG that led to its current problems, while the less-regulated property and casualty insurance policies remain profitable. A move toward additional regulation in the property and casualty market would mean less choice for consumers and inadequate availability of services for claimants.
In our recent study of the effect of regulation on insurance market competitiveness, we found that both competition and product quality improved the most when regulatory barriers were minimized and rate controls lessened. The Feds would be wise to allow the market to run its course. It has a better track record of success then any government agency.