The seemingly endless line of companies looking for taxpayer-funded bailouts just keeps getting longer, and the folks in Washington show no sign of forcing anyone out of it. This morning, we’ve learned that life insurance firms will receive aid from the TARP.
From the Wall Street Journal:
“The Treasury Department has decided to extend bailout funds to a number of struggling life-insurance companies, helping an industry that is a lynchpin of the U.S. financial system, people familiar with the matter said.
“The department is expected to announce the expansion of the Troubled Asset Relief Program to aid the ailing industry within the next several days, these people said.
“The news will come as a relief to a number of iconic American companies that have suffered big losses made worse by generous promises to buyers of some investment products. Shares of life insurers have fallen more than 40% this year. Their troubles led to a string of rating-agency downgrades that, in a vicious cycle, made it more difficult for some insurers to raise funds.
“The life-insurance industry is an important piece of the U.S. financial system. Millions of Americans have entrusted their families’ financial safety to these companies, so keeping them on solid footing is crucial to maintaining confidence. If massive numbers of customers sought to redeem their policies, it could cause a cash crunch for some companies. And because insurers invest the premiums they receive from customers into bonds, real estate and other investments, they are major holders of securities. If they needed to sell off holdings to raise cash, it could cause markets to tumble.
“The decision by the Treasury Department adds a third industry to the banks and auto companies that have already received bailouts from the government. While American International Group Inc. is a major insurer and is the biggest recipient of government money, its problems weren’t caused by its life-insurance operations, but derivative bets that went bad.”
You know what my biggest problem with all these bailouts is? No one seems to be denied! Money is given to almost anyone and everyone. What we SHOULD be doing is what nurses and doctors do in the ER — triage. Figure out which institutions are too weak to survive and euthanize them. Deny them bailout money. Let them fail. Then let their stronger competitors pick over their carcasses. Bolster those stronger companies with aid if need be.
Washington isn’t doing that, though. Take the banking industry “stress test.” Policymakers have already said that if any institution fails the test, they’ll get time to raise money or will be injected with government capital. Huh? What’s the sense in that? Why aren’t we weeding out the weak, allowing them to fail and parcelling up their businesses to their stronger, surviving brethren?
It’s like having two people showing up to get their driver’s license — one of whom gets a 100% on the computer-based test and passes the driving portion with flying colors … and another who shows up drunk, crashes into the curb twice, and spends the rest of the time hitting on his instructor. Should both people really be given a license? Wouldn’t it make more sense to pass the good guy and fail the other — or send him off to jail? I just don’t get this Lake Woebegon attitude, where every institution is above average (or treated that way).
{ 9 comments… read them below or add one }
Meanwhile, decades old small businesses are being forced into bankruptcy by ever increasing interest rates, pulled credit lines and calling in mortgage notes.
We have become a country of sheep, led by the corrupt to benefit the elite. Great plan, we will unfortunately see how well this plays out soon.
Mike,
I sympathize with you. I don’t get it either. We might as well accept it, there are many people in decision making roles who are addicted to money and power. This is their big hurrah! When I see people in power telling the press that someone is “Dead Wrong” about something they said I say watch out because life will come right back at you. Hang in there Mike.
Crazy!!! Life Insurers “CORE” business is fine, it always has been. It is insane and outright thievery for them to be taking money from the Government and hence the people for making bad investments. Hey all our RRSP, 401K’s are down,where we line up for some TARP or TELF or whatever they’re calling it this week??
The way to bailout small businesses is to get the economy moving again…not loan them money. The last thing a small businessman should do at this point is borrow money. That’s as artificial as the big company bailouts. Let’s quit bailing people out altogether. Many of these large firms must be beyond saving even with bailout money. I have owned a small business for thirty years. Large projects in the manufacturing sector (power, process, refining, petrochemical) are cancelling faster than you can even imagine. But I am taking Mike’s and Martin’s advice. Eliminate debt. Hang on to cash. Get out of the stock market. Sit this mess out. Follow their advice and find new ways to prosper until this all passes.
Mike, Mike, Mike,….you are missing the forest for the trees….First lets look at one fact and let me ask you one question: Do you really think that with all the best and most intelligent economists that the gov. has at it’s disposal, they would all be “lost” and implementing policies that everybody else blatantly knows will deepen the crisis and destroy the world economy??…Don’t you think at least one of these gov. hired experts would be waving the danger flag and raising a stink about how these policies are completely wrong and will only lead to a world meltdown?…You MUST ask yourself: Why is the most powerfull Gov. in the world, (actually the 20 most powerfull G20) with all the experts and nobel prize winners at their disposal are making such blatant and huge mistakes that everyone else know are wrong???..It just doesn’t make sense! right?…So then the next question is why is this being allowed to happen, in fact why is this being PUSHED in the wrong direction, why are the problems being exacerbated, the cards are being stacked against a real solution?..Why?…the only possible answer is that THIS IS the plan..THIS IS what they WANT to happen…The Elite and Bankers have robbed us over the last decades and put the world into such a level of debt that in reality it is impossible to ever repay that debt back. So why not have one more last hurrah! Rob the everyday people of any other wealth they have one last time, and at the same time put the world economy into such a crisis state that a total overhall of the world economy can be sold to the desperate world..and what is that solution?..A world currency (or maybe at most three) which can be much more easily controlled and with it control of the world itself..it has been the goal and dream of the Elite and Bankers for as long as Banking has been around and now it’s coming true!..and all you people are sitting around wondering: “How could the gov. be so stupid and blind!?”..They are not blind at all, they are very focused in fact, very focused and things are planned out much better than you think!..it’s just that the goals are much different than what you think they are!..They orchestrated the first Depression and now they are orchestrating this one!…wake up people!….
Mike – What is it that “We The People” can do about this. It seemed like when all of this first came out that some how all the people voiced issueses with bailouts and such. Now everything has gone silent. You all seem to have a large readership – is there not some way that we, spireheaded by you, could get this information out to the public?
Thanks for listening.
If drivers licenses were given to drunks who couldn’t pass the exam, we’d be talking about how to fix that system (enforce the rules, or identify insufficient ones). That’s the what seems to be missing from most anti-bailout rants. Fine, it’s insulting losers are being bailed out. But, that ship has already sailed. We should be focusing on (at least giving equal time to) how to reduce the chances of institutional greed bringing us to this dilemma again.
If something can be “too big to fail” (too much risk to society) then we should be talking about breaking up banks so no institution can present that kind of risk. Or, improve regulatory oversight (fix what we have, or increase it).
agreed, it makes no sense and I echo the prior comments. WHy have we as a nation let this happen? Most of our politicians (there are a few honest ones, who call it like it is, like Ron Paul) and corporate leaders are in bed with each other at the expense American citizens and generations to come … from outsourcing, to lack of enforcement of laws to stop illegal immigration, to lack of oversight by the SEC and other institutions to stop fraud and the build up of this housing bubble, to the current situation where the politicians are bailing out — at our expense — the corporations who made bad bets on overextended loans and toxic derivatives and by doing so added hugely to our national debt (expect your taxes to be going alot within the next few years) and devaluing the dollar. Now they come out and try to say “things have turned the corner and now improving so convince the consumer slaves to start buying things again (and stop their recent increase in savings). Most of the US citizens have been “fooled” to continue to put these guys in office. We need a 2nd American Revolution and let’s start by throwing out the disengenous and clueless senators and congresspeople (and the current administration) in 2010 and 2012 in favor of new blood who live (not just talk) the values that made America great. By my rough calculation, that’s probably about 75% of them among both major parties.
I think we are overlooking one crucial element of all of the discussions and implementations of bail out funds – that to perform these functions in any way shape or form is completely anti-capitalistic in the extreme, and our country and its well being used to be dependant on capitalism to succeed. When the government takes your money and gives it to an institution without your personal consent, that is theft – when the receiving institution has proven that it is unable to function properly in a free market, then we know that greed and not logic is what is driving the use of these funds. Even worse, I fear, is that I know that these giant corporations will take the government provided funds, transfer them to lobbyists who in turn will use them to steer the government onto a course designed to shut down banking competitors, such as credit unions (which by the way all of us should be using to ensure the banking system fails).
Badly run corporations must fail, and must be allowed to fail, else we will not have a financial system based on market realities for a long, long, long time (way past your children’s lifetimes, to be sure). If you are allowed to lose your job, these companies must be allowed to lose their existence also – or do any of you believe a corporate non-entity should have more rights than a living, breathing human being.
If you do not like what is happening to our country, please contact me at rpbarbati@live.com. I am not seeing an effort to turn the tide of this ridiculous bail out fiasco, and so I am going to start one myself.