Insurance Bailout. Putting the Government Behind Your Protection
by Efin Advisor | June 10, 2009
At Efinancialblog we keep a watchful eye on all things financial, especially the insurance industry.
The recent federal intervention in the financial services industry is well known when it comes to banks. An underreported fact is that, as of last month, the Treasury Department has also extended bailout funds to help bolster America’s insurance companies. While federal bailout funds were originally approved to help banks alleviate toxic loans, the Treasury Department has used such funds to help industries such as the auto industry and now the insurance industry significantly strengthen their financial status.
One such insurance company is The Hartford Financial Services Group Inc. Hartford announced that the Treasury Department determined they were eligible for $3.4 billion from the Troubled Asset Relief Program. Additionally, Allstate Corp., Ameriprise Financial Inc., Principal Financial Group Inc. and Prudential Financial Inc were also determined to be eligible for bailout money, though the amounts have not yet been disclosed.
Some insurance companies are reporting surpluses, such as MetLife, and have declared that they are not going to ask for bailout money.
While they are not banks, insurance companies have been negatively affected by the financial crisis. Stock portfolios for many institutional investors have decreased significantly in value and life insurers own roughly 18% of all corporate bonds in America. Moreover, life insurers have seen their own stocks drop dramatically, so there was reason to be concerned they could fall below federal requirements for liquid assets. These are the factors that made the insurance companies eligible for bailout money.
Treasury Secretary Timothy Geithner told a congressional oversight panel recently that the TARP fund Congress approved last October now has $110 billion left in the fund that has not been committed.
Do you think bailout money should be used for insurance companies? How should the Treasury spend the last 110 billion dollars? As always, your comments are welcome!
You know, at first,w hen I thought about this, I have to admit i was kind of pissed, BUT the more I think about it, this kind of makes sense. It would be pretty catastrophic if insurance companies could not pay out life insurance to grieving families. It’s also important that insurance companies can invest in the market since they, like banks, are some of they largest investors in corporate america. So i see where Geithner is coming from when he says that this is consistent with the original purpose of the bailout
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Aside from the actual validity of insurers needing money, I think its a bit abusive for the Treasury to have the authority to make this determination without congressional approval. I feel like if money is going to be given out to industries that are not banks and are not being given to get rid of toxic loans, then we would need a new bailout for this. It would have to be a separate bill that is approved by congress and debated on the floor of congress.
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This is outrageous. You know, I wasn’t in favor of the original bailout, but I saw the merits of it at least. But seriously, who isn’t going to get a bailout? What is next, the porn industry bailout? Come on, none of this is helping everyday folks like me and my family.
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How did I not hear about this news from anywhere else? Shouldn’t this be covered on the major networks at least a little? This is why i read efinancialblog. I would never have found this information elsewhere
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Personally, I’m thrilled about this from a political perspective. Not for democrats or the bailout or anything like that. I really like the executive being able to do more without congress’ permission. I know a lot more about obama than i do about whomever my senator is. I know a lot more about what he is doing than what they are doing and Geithner knows a lot more economics than most congressmen. More people also vote for president, so I think it makes sense that they can decide this
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