Blunt creates new financial regulatory department

JEFFERSON CITY, Mo. -- Gov. Matt Blunt created a new department to regulate finances on Wednesday, merging duties previously performed by the Economic Development Department with those of the state Insurance Department.

Blunt's executive order for the merger followed the recommendation of a government review commission he created last year, except on one contested point.

The panel also had recommended that securities oversight be transferred from the secretary of state's office to the new financial department. Blunt, a Republican, said he believed the transfer would be good for consumers but opted against it because Democratic Secretary of State Robin Carnahan opposed it.

The merger of the Insurance Department and certain divisions of the Economic Development Department will take effect Aug. 28 unless the legislature acts to stop it. The Insurance Department will be renamed the Department of Insurance, Financial Institutions and Professional Registration.

The securities transfer would have required legislation, Blunt said. Because Republicans control both the House and Senate, Blunt could have asked GOP lawmakers to enact the securities change over Carnahan's objection.

But "when you strip an authority that resides in an elected state official's office, I think that's very difficult to do without bipartisan support," Blunt said.

In recommending the securities merger, Blunt's Missouri State Government Review Commission noted that some financial service firms now offer securities, banking and insurance products. The commission's report said, "it makes sense administratively and as a matter of public policy" to combine the regulatory oversight of all three areas.

Blunt echoed that belief, asserting the securities transfer "clearly would be in the best interest of consumers."

But Carnahan described Blunt's decision not to pursue the transfer of the securities division as "a victory for Missouri consumers." She said the secretary of state's office had effectively regulated securities for 80 years.

"I've said all along that it didn't make any sense to put the regulation of people's life savings into a big new bureaucracy that also regulates tattoo parlors and beauty shops," Carnahan said.

Carnahan was referring the Division of Professional Registration, which oversees a wide variety of fields, including doctors, accountants, barbers, funeral directors, tattoo artists and body piercers.

Moving that division out of the Department of Economic Development, while also freeing the department of financial regulation, should allow it to focus on attracting and keeping jobs in Missouri, Blunt said.

The new department, meanwhile, will have a primary function of regulating industries and professionals, the governor said. Besides professional registration, the new agency also will gain the Division of Finance, the State Banking Board and the Division of Credit Unions.

Insurance regulation was a part of the Department of Economic Development until voters adopted a state constitutional amendment in 1990 creating a freestanding Department of Insurance. The constitution says the organization and duties of the Insurance Department are to be determined by state law.

The governor's office said that, under state statutes, a reorganization order has the full force and effect of law if the Legislature chooses not to block it.

St. Louis attorney John Fox Arnold, who championed the new finance department as a member of Blunt's government review panel, said he was pleased the governor enacted most of the recommendation.

"I would have preferred the merger of securities into this new department, and I'll be happy to support anyone who wants to move in that direction," Arnold said. But "I understand that this kind of a change would be more difficult than a change achieved with an executive order. I certainly have no quarrel with the governor."