Reports: Insurers, emerging markets next in l…

The credit virus just keeps spreading, and with each new outbreak of disease,various government agencies are forced to respond. The government is now talking about allowing insurance companies toget their hands on billions in bailout money. Here’s anexcerpt from the Washington Post:

“The Treasury Department is working on ways to broaden its $700 billion bank rescue program to help insurance companiesthat are a critical backstop to a wide range of deals, bond issues and leasing arrangements, sources familiar with thematter said.

“Treasury is worried that insurance companies, many of which report earnings next week, could face similar fates asAmerican International Group as the credit crisis worsens, triggering a new wave ofproblems for the financial markets. AIG nearly collapsed last month when it was overwhelmed by losses from real estateinvestments and derivatives, requiring massive government loans of more than $123 billion. It has already burnedthree-quarters of that money.

“Treasury officials said today that insurance companies organized as thrift holding companies are eligible to receivemoney from the government because they are regulated by the Office of Thrift Supervision. Treasury has formed a team tospecifically examine mounting trouble within the insurance industry.

“But industry sources said that Treasury is also looking at ways to aid insurance companies that have no federalregulator. Many of these companies are subject to oversight by state authorities.”

And it doesn’t stop there, according to the New York Times. The IMF is looking into potential bailouts of emerging market countries hit hardby the credit crisis. An excerpt:

“With the financial crisis engulfing developing countries from Latin America to Central Europe, raising the specter ofmarket panic and even social unrest, Western officials are weighing coordinated action to try to stabilize theseeconomies.

“The International Monetary Fund, which is in negotiations with several countries to provide emergency loans, is alsoworking to arrange a huge credit line that would allow other countries desperate forforeign capital to borrow dollars, according to several officials.

“The list of countries under threat is growing by the day, and now includes such emerging-market stalwarts as Brazil,South Africa and Turkey. They have become collateral damage in a crisis that began in the American subprimehousing market.

“The fast-growing economies of the developing world depend on money from Western banks to build factories, buymachinery and export goods to the United States and Europe. When those banks stop lending and the money dries up, as ithas in recent weeks, investor confidence vanishes and the countries suddenly find themselves in crisis.

“Details of the arrangement are still being worked out, but it could be supported by Japan and several oil-producing countries, a fund official said. The fund has not yet approachedthe Federal Reserve, according to officials, although the Treasury Department has expressed interest.

“Two weeks ago, the Fed set up unlimited swap agreements with the European Central Bank, the Bank of England and othercentral banks to ease the severe credit turmoil in Western Europe.

“This time, the focus would be on emerging markets, with good economic records, which are having trouble borrowingdollars.”

1. The latest on LIBOR, rate cuts, and other eff… It’s a busy day on the global markets front. So let’s get right to the news … * U.S. dollar...
2. Fed to issue its own debt? Things keep getting curiouser and curiouser over at the Federal Reserve. According to the Wall Street Journal, the Fed is...
3. Will anyone in Washington have the courage to… That’s what I’m left wondering when I read stories like this one,entitled “Bailout scope limited to … virtually anything.” Here’s...