This move by the New York State insurance department provides more evidence that having regulators compete with each other can have more upside than down.

Remember that some proposals for "reform" have aimed at getting insurance regulation out of the hands of the states and into the hands of the Feds. 

But this is a backdoor way of capturing regulation since it's much more feasible to do so when it's concentrated in one place, especially when that place is the Beltway.

And others wanted to disarm state securities regulators in similar fashion. But here again, there's fresh evidence that it makes more sense to do the opposite. According to one press report last week (sorry, no link), the National Association of State Securities Regulators are out to get Congress to enact legislation that would effective overturn the Supreme Court's decision last year in the Stoneridge case that ruled that banks and accountants couldn't be sued for aiding and abetting financial fraud.

Both of these developments, like the example of Judge Rakoff in the Bank of America case, show that federal regulators need competition to keep them on their toes.

And that's why Chris Dodd's move to one-up the Obama Adminstration on consolidating bank regulation is a step in the right direction. Yes, he would merge some overlapping agencies at the federal level. But that's not a problem in my view, because unlike the Obama plan, he wouldn't put the Fed in charge.

And that's good. Because if, as this story reminds us, the Fed is so touchy about its "independence," to whom would it be accountable? Some commentators would have you believe Congress would call the tune, but a closer look suggests it's the banking industry itself.