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Where -- And When -- Insurers Went Wrong

The current "jolting" investigations spawned by Eliot Spitzer and Richard Blumenthal, attorneys general of New York and Connecticut, and by John Garamendi, insurance commissioner of California, come as no surprise to this former insurance regulator ("The secret world of Marsh Mac" and "A crazy quilt of rules," Cover Story, Nov. 1). Price fixing and side compensation deals for brokers are the result of the lack of cost-based competition. An unregulated oligopolistic insurance-brokerage sector inevitably leads to predator pricing. "Cartelized competition" is what we have in U.S. insurance markets. It is the product of a hoary U.S. law that needs overturning: the McCarran-Ferguson Act of 1945.

McCarran-Ferguson essentially exempted insurance from federal antitrust laws and regulations as "not being in the stream of interstate commerce." State regulatory systems have failed historically to redress these competitive imbalances that deprive insurance consumers of the requisite information to make informed choices. We need federal chartering of insurers akin to our bifurcated state and federal banking system, coupled with financial examinations equivalent to those of the Office of the Comptroller of the Currency. Canada has had such a system for decades; so could we here in the U.S.

Jerome Gordon

Fairfield, Conn.

Editor's note: The writer is a retired investment banker and was special assistant to the New Jersey Insurance Commissioner in 1979-81.

As vice-president for human resources at a large corporation, I worked for 10 years with both Marsh & McLennan Cos. (MMC) and Mercer Management Consulting at their Minneapolis offices. I found the people I dealt with at both Marsh and Mercer to be top-flight, highly ethical professionals. These same people are now experiencing huge losses in their 401(k) plans and stock options as Marsh stock dropped almost 50% in one day. Their personal pride in working for what they have always considered an ethical company has been severely eroded. Top executives at companies such as this wheel and deal in a world divorced from the realities of what their actions can mean to their rank-and-file employees, and to their customers who have trusted them over the years.

John P. Oldendorf

Lake Elmo, Minn.

In cases like those discussed in "When home buying by the poor backfires" (Economics, Nov. 1), our experience working with more than 2,300 communities across the nation tells us that the answer is not to put on the brakes. Studies show that credit and pre-purchase homeownership education and counseling can lower mortgage delinquency rates by up to 34%. Despite these benefits, only 15% of first-time home buyers receive quality training in advance.

Neighborhood Reinvestment Corp. is working to close this growing gap. Our NeighborWorks network has provided counseling to 400,000 families and has assisted more than 75,000 low- and moderate-income home-buying families.

Kenneth D. Wade, CEO

Neighborhood Reinvestment Corp.


Low-income families have been denied the stability, prosperity, and economic foundation of homeownership because they lacked the wealth to make a downpayment. In 1997, Nehemiah Corp. created the first downpayment assistance program, essentially standing in place of a giving parent. Since then we have helped more than 180,000 families achieve homeownership and have created an industry that, combined, has helped more than 500,000 families. According to a recent Milken Institute study, these families on average have seen equity gains of more than $18,000 in the just the first six years -- and the gains are still growing. In fact, Nehemiah's first 115,000 gift recipients have already accrued more than $2.2 billion in home equity. Homeownership creates a new level of financial accessibility and fundamentally alters the economic landscape for generations to come.

Scott Syphax, President and CEO

Nehemiah Corp.


Over the past 18 years, Yucaipa Cos. has invested several billion dollars in worker-friendly companies and underserved areas, a point that is the key to maintaining our high returns ("Pretty liberal with the cash," Finance, Oct. 18). Most of the companies in which we invest are in retail, logistics, and manufacturing. Yet the article focused on only two of our investments, each representing less than 1% of our portfolio, solely because one involved an entertainment figure and the other the former Vice-President of the U.S. Our investment in Sean John was used largely to build the warehousing and distribution infrastructure for one of the fastest-growing companies in America. The investments in each of these companies was made with the same policies that have given Yucaipa more than 40% internal rate of return for the past 18 years.

Ron Burkle, Managing Partner

The Yucaipa Cos.

Los Angeles

New York is certainly becoming a more attractive location for retirement ("Spending your golden years in the Big Apple," Personal Business, Nov. 1), and a major reason is New York's extraordinary wealth of cultural assets. Business Volunteers for the Arts, a program operated by the Arts & Business Council Inc. since 1975, matches business people, including those who are retired, as pro bono management consultants with nonprofit arts groups. More information is available at

Gary P. Steuer, President and CEO

Arts & Business Council Inc.

New York

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