Why Are We Bailing Out Insurers?
Will someone please explain to me why we are giving $22 Billion to Insurers?
“The Treasury Department will make federal bailout funds available to a number of U.S. life insurers, acting on the embattled sector’s long-running effort to get government help. The Treasury is prepared to inject up to $22 billion into the insurers under the rescue plan launched last fall as the Troubled Asset Relief Program, said a person familiar with the matter.
The capital infusions mark the first new round of federal rescue funding since the biggest banks got more help around the turn of the year. Aid for the struggling life-insurance industry was expected, but the companies had been waiting for weeks since The Wall Street Journal reported in early April that the Treasury had decided to give federal money to qualified companies in the industry. As far back as November, some companies were taking steps such as agreeing to buy savings and loans in order to become eligible . . .
Many life-insurance companies, like others in the financial sector, got caught carrying too much risk when the financial crisis hit. Some were hurt by their variable-annuity businesses, under which they sold products often linked to equity markets that promised minimum payouts even if markets fell. Insurers also lost money on investments in bonds, real estate and other assets that back their policies.”
Why?
Why do insurers, who have fiduciary obligations to manage their assets prudently, require taxpayer largesse?
Yet even more moral hazard is being heaped upon us.
This is totally unacceptable. If you did not manage your assets prudently, if you failed to employ appropriate risk management procedures, and if you come to the government teat for aid, there must be a heavy cost and major strings attached:
- Bailout Monies need to be eventually repaid;
- Entrenched management needs to be fired;
- Excess bonuses must be clawed back;
- Shareholders (both public and mutual) need to suffer for their bad investment;
- Competitive firms that ran their business properly should not be disadvantaged.
Why would we give money managers with a demonstrated inability to manage it properly? Why would we reward shareholders who made losing bets? Why are we punishing well managed, prudent funds? THIS IS OUTRAGEOUS.
These are independent companies who should be able to raise capital on their own. At the very worst, the most I believe that should be authorized for these firms are loan assistance/guarantees. Even that is problematic.
Here is where $22 billion in Corporate Welfare is going:
Hartford Financial Services
Prudential Financial Inc.,
Principal Financial Group Inc.
Lincoln National Corp.
Allstate
Ameriprise Financial
>
Source:
U.S. Slates $22 Billion for Insurers From TARP
ANDREW DOWELL and JAMIE HELLER
WSJ, May 15, 2009
http://online.wsj.com/article/SB124234565889921705.html
May 15th, 2009 at 7:20 am
Why? Yes, Why, indeed.
after a good stropping, seems like: “b/c we allow the .gov to do whatever it pleases, for whomever they choose.”
after all, the “free market” Failed–I think I read it ‘in the News’.
http://www.thefreedictionary.com/strop
as an aside, speaking of ‘reading’, past RIF, is KIPP http://www.kipp.org/
May 15th, 2009 at 7:30 am
These mother f’ers in gov’t have no idea what they are doing…..or worse, they know what they are doing and they don;t care because they are protected by the largesse of the fed gov’t.
Makes me sick…..
How far do you think 50 billion would go in terms of cancer research? Funding schools? How bout $500 billion?
I need a xanax.
May 15th, 2009 at 7:32 am
Symptomatic of the last 2 decades, where CEOs think they have been given a fiduciary responsibility to loot the company treasury.
May 15th, 2009 at 7:43 am
“THIS IS OUTRAGEOUS”.
So was the 700 billion dollar bailout of the banks…no difference
I hear a trucking company wants a piece of TARP now!
get in line behind CALIFORNIA and LAS VEGAS
May 15th, 2009 at 7:44 am
one word: annuities
Have to protect the baby boomer retirements
May 15th, 2009 at 7:45 am
why?
a> 1st thing .. they need it .. I cashed out awhile ago when a> no kids so why worry b>dont trust the sys no more or if c> got kids but need it now .. lifes gettin $ short . so live it up
b> free money (.25%) as long as you figure a way or don’t mind not rippin rewards
c> to keep playing in the sandbox .. noticed alot of advertisers in that list & apply above
.25% upto 29% what a business .. f ur biz
May 15th, 2009 at 8:03 am
the way the story played out- the insurers receiving tarp funds- billions- was reported as if a normal business transaction was taking place- no raised eyebrows- no investigative reporting- just a quick note- “oh by the way Allstate, Prudential, etc to receive TARP funds”- like nothing could be more normal-
we are everywhere becoming numb to bailouts- its the “new normal”
May 15th, 2009 at 8:04 am
Barry,
This debt won’t be paid back. Fate has determined that this is the time of the denouement of a long series of poor financial decisions by our government. It will end very badly, I am afraid. Fiscal responsibility just got away from us, and like the Romans, and the British, we now will suffer the long winter. Sorry, the bad guys win in this movie….
May 15th, 2009 at 8:06 am
dcsos – “get in line behind CALIFORNIA and LAS VEGAS”
So as not to ruin your bagel next time, I agree with dcsos. Within six months, all states will be bailing out California and any other government entity that did “not manage… assets prudently, …failed to employ appropriate risk management procedures,” or use taxpayer money wisely.
The cry of state secession may become louder as states like Texas, Utah and others who wisely budgeted monies and set-aside funds for a rainy day will be forced to send money to states and cities who did not. As is the case in our general society today – we are all victims that need rescue. Personal or governmental responsibility is dead.
May 15th, 2009 at 8:08 am
Interesting aside:
When my mom passed away in 2005, I found, among her belongings, a MetLife life insurance policy, purchased for her by her mother in 1934, in the depth of the GD, for a dime (my mom was a 2 year old, at the time, and the second of 5 kids) . The policy had been converted to stock some years earlier when MetLife had changed corporate status. As we were just beginning the big descent into our current situation in 2005, I wanted the stock cashed out as soon as possible. The stock sale netted close to $900. In roughly 70 years, a dime turned into $900. I’m glad MetLife wasn’t on BR’s list of the TARP leeches.
May 15th, 2009 at 8:10 am
Hoo boy…Barry, you’re cookin’ today. The white heat of your righteous indignation is baking the paint on my monitor – no wait, that’s the fire which just broke out in the ashtray. Oh Crap. [pause]
OK, back.
Reason: the advancement of socialism of course.
Seriously though, I agree with the spirit of what you’re saying, but not (all) your prescribed remedies. Nossir, not all of ‘em.
Entrenched management needs to be fired: – No argument. job one, done on day one. You – Out!
Excess bonuses must be clawed back:
That’s thinking about this the wrong way, and unacceptable because of what it represents. Right or wrong, good or bad, bonuses were awarded as a result of a contract specifying; ‘do [this], get paid [that]‘. Just because someone gets on their high horse after the fact, huffs, puffs and experiences a full blown attack of moral outrage shouldn’t make a whit of difference. A contract is still a contract – period. Yes there’s precedent, but that precedent was illegal. We can’t go further down that slippery slope. Enough ethical/moral/legal boundaries have already been crossed, let’s not perpetuate the wrongdoing. Enough already!
Geez, now I’m getting a full blown moral outrage attack, it must be contagious…….
Shareholders (both public and mutual) need to suffer for their bad investment:
Wait a minute, what’s gotten into you? Let’s say I’m a little guy (regrettably true, in stature at least) and through my 401K, bought 250 shares of HIG. Why in hell am I supposed to ’suffer’? Why was it a “bad” investment? Where is my culpability? If I bought HIG on March 6th at $3.62 thinking to myself “surely the insurance companies will be OK?” – right now I’m thinking to myself that wasn’t such a dumb decision. Then “you” come along and tell me I’m about to get hurt because I made a bad investment…..wait a second, why was that a bad investment, and why am I about to get pounded on? (repetitive, but purposely so in the interest of firmly making the point).
Yes, these companies ought to be able to raise capital on their own. Oh and indeed this should be no more than loan guarantees. I’m kinda glad you made that point.
I’m guessing only, in saying that the stench of fear can be smelled in the halls of Congress. It might go something like this; “We can’t allow policy and annuity holders to even get a whiff of something being amiss within the insurance industry, that’s a recipe for a different kind of panic. We gotta protect widows and orphans”.
Here’s a proposal. Because fiduciary obligation is such a serious issue, money managers who egregiously fucked up, should be prosecuted for violating their fiduciary responsibility to their clients. If members of other professions can be punished for malpractice, why not money managers within the insurance industry?
And yes, it taints the prudent well managed institutions, who now have to assemble the resources to somehow communicate the message that they are not evil, weren’t badly managed, and neither need nor want “gubment munneh”, loan guarantees, or in fact any help whatsoever. Bottom line is that properly managed firms are now playing defense in the PR world when they shouldn’t have to.
The gang that conspired to repeal Glass-Steagall should be tried for treason, and executed by firing squad – publicly! Execute a few of these people, and the pucker factor is going to kick in rather rapidly. Responsible legislating quickly follows. What did you say? It’s illegal? Let’s make it legal then. I rather suspect any such move would receive quite significant public support.
May 15th, 2009 at 8:11 am
More highway robbery in broad daylight.
May 15th, 2009 at 8:13 am
Actually, because of their conservatism insurance companies are forced to match assets and liabilities in many parts of their business.
Since the US government stopped issuing long term securties for a while, insurance companies were forced to find other avenues in their search for long term securities: MBS and/or mortgages.
In Canada, the problem was not as extensive because the country never stopped issuing the long term treasuries so when I compared both sectors it was obvious that the US insurers were way riskier than their Cdn counterparts and obviously setting themsleves up for trouble.
Just one more credit bubble clue. If America actually cared to look at what was happening outside their country, they might have seen some red flags.
May 15th, 2009 at 8:14 am
@ austincompany
Funny thing about some of the states that have currently proposed secession is that they’ve been net takers of government money for so many years (getting more in tax money than they receive). Yet, it’s now that it’s unfair that they’d have to bail another state out (who may have been a ney payer for many years.
I’m fed up with the bailouts, too, but also with hypocrisy.
May 15th, 2009 at 8:14 am
Barry,
If your suggestions are followed, how do I keep getting cheap insurance rates?
May 15th, 2009 at 8:14 am
Sorry, typo should read –
“Yet, it’s now that it’s unfair that they’d have to bail another state out (who may have been a net payer for many years).
May 15th, 2009 at 8:20 am
First we bailed out banks. Now we bailout insurers. Maybe next we can bailout lemonade stands so as to make The USA an equal opportunity(em) bailer-outer!(/em)
BR’s book couldn’t be more timely.
May 15th, 2009 at 8:22 am
Barry,
This no doubt will not assuage you, but you should keep in mind that, among other things, a significant problem for many of the insurers is that the mortgage-backed paper they bought in their portfolios prior to 2008 was rated AAA. A lot of that paper is now rated at junk or just slightly higher. That has caused significant hits to the financials. Not sure that buying top rated paper is a breach of fiduciary duty by the officers of the insurance companies. No doubt they now have tightened their investment and risk parameters, but I think it is a little much to insist that they should have been smarter in previous years than S&P, Fitch and the rest of the ratings agencies, or smarter than the brain trust at the Fed for that matter. Monday morning quarterbacking is fun but not always fair.
Also, as some of the other commenters have noted, insurance companies have significant outstanding obligations to consumers for annuities and life policies. Protecting those obligations also has public interest.
I am in the industry, by the way, so I do have a bias.
May 15th, 2009 at 8:32 am
Texas and utah would make great 3rd world countries. I hope the door don’t hit ‘em in the ass on the way out.
In 2003 (the most recent year I could find), Texas received the most Federal Defense dollars ($30+ billion) of any state other than Virginia (a.k.a: Texas, Jr.). While they are net tax payers, they don’t come close to being the highest taxed (Texas ranks 15th). Utah receives $1.07 for every dollar it puts in.
The governors and Legislatures of those States should remember that Treason is a capital crime.
On an interesting note, and in support of my postulation that taxes make for a better society, there’s this:
http://www.marketwatch.com/story/the-happiest-places-on-earth-are-heavily-taxed?siteid=rss
May 15th, 2009 at 8:36 am
Marc Faber says capitalism will fail due to money printing and bailouts:
http://www.cnbc.com/id/30742936
May 15th, 2009 at 8:36 am
C_O,
your post delineates the type of ‘pass’ being executed, all the way to the End Zone.
~~
though, differently, the TARP bailout/payoff might have been used to ‘quiet’ a potential Class Action lawsuit against the NRSROs–the, truly, stinking kettle of Fish in the Market…
May 15th, 2009 at 8:38 am
First time caller, long time listener…..
I have about 25 million under management at one of these firms. I was told by them at a seminar 2 weeks ago that they had indeed applied for the funds, but that they were waiting for the reply from Treasury to see what strings would be attached. They didn’t feel like they would need the money, and they were likely to decline the offer.
May 15th, 2009 at 8:40 am
Ahab:
Bailouts ARE the failure of capitalism. By it’s nature, fiat currency is doomed from the get go.
May 15th, 2009 at 8:42 am
You’re just pissed because they did it after the book came out.
Relax. Now you have a god reason for people to buy both editions: the one that just came up and the one updated with new bailouts. These bailouts are becoming an annuity for you. After the insurers, you will get to write about California after they decide they deserve lots of free money to subsidize everything they want but can’t seem to pay for. Then more farm subsidies to pay for food that we can’t afford to buy because the cost of production is too high due to oil prices being inflated by speculation. Then comes the telephone companies because of the necessity of maintaining a communications infrastructure and having a telephone is too expensive for most people since unemployment is 15% and underemployment is 30% by then. Ditto the power companies since it would be unjust to give free money to one utility without gifting the others. Then comes education since stupid people can’t figure out how to solve the problems created by smart people.
May 15th, 2009 at 8:42 am
Jack:
Did they ask for it, or was it offered? Your comment says that it was both applied for and offered.
May 15th, 2009 at 8:43 am
sorry Marcus- it is 50 States that make up the United States- the federal government was never intended to have the power it now wields-
Vermont has been talking about seceding for years- you see “Vermont out of USA” stickers all over the place- it use to be a Republic after all- as was Texas, as was California
May 15th, 2009 at 8:43 am
Will someone please explain to me why we are giving $22 Billion to Insurers?
Why? It’s very simple. Our govt wants to ensure that we will go into Depression 2.0.
May 15th, 2009 at 8:49 am
So “We the People” protect citizen’s annuity decisions and in a few years the loan(s) get paid back with interest, I’m fine with that.
If you’ve got the power to ruin people’s financial lives, here’s some guidelines on how “We the People” want to you be paid, so you don’t incetivices the CEO’s into “too much” risk. Now, after that (in the future,) if you want to put your annuity into a firm that is not abiding by the government’s exec. comp. rules… you don’t get any bailout next time.
We’re not “bailing them out,” We’re saving our own citizen’s retirements. Any politician who runs on a “free up the banks and insurers” platform while this generation is still alive doesn’t have a chance. No more Reagan/Greenspan/Bush nuttiness. That’s a good thing.
Oh, and one national regulator for insurance. Why all the wasteful duplication of effort times all fifty states? It’s a monstrosity.
May 15th, 2009 at 8:53 am
dead hobo Says:
May 15th, 2009 at 8:42 am
Relax. Now you have a god reason for people to buy both editions
comment:
——————
At first I saw this and said to myself “shit, a typo”. Then I realized that I just discovered the new Republican agenda that will save the party. The GOP has been the party of borrow and spend (live on borrowed money, stick someone else with the bill) since Ronald Reagan. They’ve also embraced the reactionary nutball wing of the insane Christian right, practically forever.
What they need to do is combine the two boldly. Claim its Armageddon. Today! God’s will is punishing us. Then they need to manufacture a new enemy and rally the people into a borrow and spend policy that stimulates the economy. This would be a hell of a stimulus plan.
May 15th, 2009 at 9:02 am
They got tooooo big. Now everyone with them is at risk thanks to, in large, them binging on exotic tixic greed.
Not too different from this watch… Systemic Risk http://video.yahoo.com/watch/5022020/13357762
Now the “Fed” is scurrying around buying crap worrying that sheeples will loose faith in everything.
May 15th, 2009 at 9:03 am
Ahab:
The Civil war would seem to have settled the issue of leaving the Union. Maybe it didn’t.
If you think 50 independent states would be at all workable, or that any one could achieve the prosperity or security we have, without Federal primacy, I don’t think you’ve reasoned it all out very well.
The Louisiana purchase, assertion by the Federal government of the Manifest Destiny doctrine, The Gadsden Purchase, the annexation and settlement of the Oregon and Oklahoma territories, The Homestead Act, and the purchase of Alaska were all undertaken with Federal dollars, and the States chartered by the Federal government, I don’t see anyone but Texas as having a claim on sovereignty, by any measure. I’d love to see Texas try to go it alone.
May 15th, 2009 at 9:05 am
I stole this quote from JESSE’S CAFÉ AMÉRICAIN- Lord Acton I think:
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”
amen to that
May 15th, 2009 at 9:09 am
“Marcus Aurelius Says:
Texas and utah would make great 3rd world countries. I hope the door don’t hit ‘em in the ass on the way out.”
And I’m sure you live in the perfect state that is both beautiful, thrifty and wise- what an a**hole. My point was not about state seccession per se. The point was that states, companies, etc. that work hard to be thrifty, save and play by the rules seem to be getting screwed by having to BAILOUT those entities that have been careless with their funds. However, someone like yourself coming from the state of oz probably missed the point.
May 15th, 2009 at 9:11 am
The banks (including the shadow banks), the ratings agencies, hedge funds and their ilk, and the insurance industry. The compass of blame is settling squarely on our Financial “professionals.”
It’s contained.
May 15th, 2009 at 9:11 am
Here’s why; scratch my back (give you Tarp dollars) and I’ll scratch yours (get you a cushy job)
see http://www.nakedcapitalism.com/2009/05/guest-post-pension-probe-tip-of-private.html
Getting mader by the day..
DOW 3600 !!
May 15th, 2009 at 9:11 am
How exactly does this “moral hazard” argument work?
Let’s see. If we don’t allow the widows and orphans to descend into miserable penury, in the future there will be no disincentive to buy life insurance from a company that invests the premiums in Triple-A rated mortgaged-backed securities, or from a company that might be acquired by another company that invests the premiums in … oh, whatever.
Let’s just say that Tim Geithner is way too cozy with those fat cat widows and orphans!
May 15th, 2009 at 9:13 am
Greed, Complacency, Hubris
May 15th, 2009 at 9:14 am
Marcus-
Civil war did put an end to that- at that time- but countries aren’t forever and I’m not wedded to the USA- love it or leave it symbolism- case in point- the North Atlantic Provinces of Canada- if their was a secession of Quebec- had indicated they would likely try to become part of the United States- and I say of course- why not! Its all fluid- and always has been-
If Hawaii or Puerto Rico wanted to become independent nations- great! why should I give a shit. If Vermont finds its values and identity more closely aligned t0 Canada- so be it-
who am I to stand in there way
May 15th, 2009 at 9:14 am
I worked as a temp for many years in almost all of the different industries that are now being bailed out. I worked for one large insurer in the exclusive high wealth division. One of the top salesman used to show me his annuity marketing charts. He would show me how he could prove to customers that buying their annuity was the best way to go. Then he showed me how he could do it for any of the other companies on the list that he was dissing.
May 15th, 2009 at 9:18 am
God is an aura .. not a tangible thing .. an energy .. + – ?
The Bible a script (a history) .. and actually open ended with 2 end games
now you highly manipulative cockroaches act and play your parts
the $ pyramid is crumbling . again … it will work out .. time and will always does … just maybe not for you or me because a single will is not always enough
imo things and coming times are not going to be good … lots of gigo in the system
squeaky wheels get the grease … f’d systems need to break 1st
graven images / mind control
May 15th, 2009 at 9:18 am
‘Did they ask for it, or was it offered? Your comment says that it was both applied for and offered.’
My understanding is that the Treasury said that their company would be eligible, but they had to apply for the funds. They felt that they would go through the application process to see what the conditions and the amount available would be, and then decide if they would accept the offer (which is what has been announced today). Based on everything I know about the strength of this company, I will be disappointed if they take the money. Unfortunately, they will probably wait to see what the other companies do, with one of the other considerations being that, if everbody else takes the cash, does it put them at a possible competitive disadvantage because they opted out. MetLife was mentioned in the seminar as an example of a company that saw all the strings attached to the money, and decided against a ‘new public partner’.
May 15th, 2009 at 9:22 am
austincompany:
I live in Virginia, and Virginia is the biggest shit-talker there is after Texas. I get the point – I’m just not blinded by the home-boy affliction. You posted an opinion that justified secession (if it wasn’t about state seccession per se, why did you mention it? Your comment was exactly the definition of “per se”) and I posted some figures in response. So you call me an asshole? Ad hominem attack much? Nice.
If you don’t want to talk about it, don’t bring it up.
May 15th, 2009 at 9:23 am
gloppie Says:
May 15th, 2009 at 9:11 am
DOW 3600 !
reply:
————-
I can’t speak to Dow 3600, but the statement isn’t otherwise too far off. The markets at this moment have the same ‘feel’ as they did at in November 2007. Lots of people you would think are smart have their heads buried in the sand again. Back then, I honestly thought S&P 800 was a bad joke. Ha Ha on me. It’s been an education. Denial is back and you can’t use denial to defy gravity.
Any day now, it will begin again. Maybe today. Maybe not today. The real bottom is unforeseeable as denial obscuring it. After it’s complete, again, the S&P will chart out like similar vertical drops of recent months. I just don’t know the ultimate magnitude. It’ll be a big one though.
May 15th, 2009 at 9:24 am
jack:
Thanks for the clarification. On the one hand, it must be nice to have $25 mil in assets, OTOH, it must suck to figure out what to do with it in this environment. Good luck.
May 15th, 2009 at 9:33 am
@austincompany at 9:09 am
“…what an a**hole…., someone like yourself coming from the state of oz probably missed the point.”
Perhaps it has escaped your attention that Barry runs a rather civil blog where ad hominem comments are not particularly valued. Commenters can and do get sent to the penalty box for egregious behavior.
May 15th, 2009 at 9:35 am
I’m willing to believe that ALL these companies are being forced to take the money, siphon off a little, and stash it in a slush fund whichy will be available to every politician in Washington when they skip town…
Call it their “supplementary” retirement fund…
Hell, I’m willing to believe ANYTHING these days…
When I left Italy after living there for 12 years, i thought i was leaving that kind of political behavior behind…I guess I was wrong…
May 15th, 2009 at 9:37 am
About new bailouts to write about in the next edition, I forgot about YRC. This one is insane. Trucking is an industry that approximates perfect competition. Practically no barriers to entry if you can navigate the regulations. if YRC dies, XYZ will come in later on. To the economy it’s a freebie.
Their sales pitch for why they need to go on welfare should be interesting. I wonder how Uncle Stupid will react.
May 15th, 2009 at 9:39 am
One word: Pensions. Hey, we’re bailing out trucking companies too. Who’s next? Step right up, folks.
May 15th, 2009 at 9:42 am
Marcus-
dude- I live in Virginia- I love Virginia- probably one of the prettiest states by far- and I’ve been to pretty much every state outside a couple such as Nebraska and Kansas- I live near DC so go the best of both worlds- wide open country to the West of me and urban life to the East- both having a lot to offer.
May 15th, 2009 at 9:48 am
saying we should bail out insurance companies because they lost money buying AAA paper is like saying we should bail out mutual fund companies because they lost money buying “strong buy” rated stocks
May 15th, 2009 at 9:55 am
“Will someone please explain to me why we are giving $22 Billion to Insurers?”
Because we can! (so the Beltway thinking goes, not that I agree). Say it together now, “Yes we can!”
May 15th, 2009 at 9:55 am
Folks, this is not a surprise. A (the?) major issue is the intertwined reinsurance links between all the players. Much like the CDS web in banking. Spreading risk.
This was discussed in connection with AIG, side letters, and how their corrupt insurance practices during the Greenberg era started seeping into securitization.
May 15th, 2009 at 10:00 am
Ahab:
We’re neighbors. I live in Virginia by choice (and I especially like especially NOVA), but I’m not blind to some of the more troublesome aspects of the state. Drive out through Loudoun/Prince William/Spottsylvania/Caroline counties, and you’ll see clear evidence of the housing bubble and its aftermath. The tax base is eroding in these counties (Fairfax is, so far, not really affected, but I don’t know how long that will last). Go down south, south of Richmond and along the NC border, and you’ll see the dominance of the religious right, as well as the remnants of ’50s era racism and pockets of entrenched Appalachian poverty. If not for the NOVA/Tidewater — Fed Gov support, we’d be more like California.
Like anywhere else, there’s good and bad. Dispassionately: it is what it is.
May 15th, 2009 at 10:02 am
Sorry for the cross-talk. I’m stopping now (promises, promises).
May 15th, 2009 at 10:02 am
Speaking of bailouts…
I’ve been getting some e-mails this morning about bill “hr 1388″…
Purportedly, we’re bailing out HAMAS to the tune of $20 million in relocation and assistance…
Any truth to this or is is just spin?
May 15th, 2009 at 10:04 am
Marcus-
Perhaps you were correct. My words clouded my overall meaning. The jest of Barry’s post was one of frustration and anger towards the giving of monies to companies who do not deserve it – for one reason or another. When a fellow poster brought up the real possibility of a future bailout of California, the thought of “deserve”, “need”, etc. entered my mind – as it does when we speak of GM, Hartford or AIG. My apologies if I over-stepped.
May 15th, 2009 at 10:04 am
@ahab: “WILL fail?” It’s already failed. All that’s left are divvying up the spoils.
May 15th, 2009 at 10:07 am
Austincompany:
Thanks. Understood. No problem. Never happened.
May 15th, 2009 at 10:11 am
@cvienne: That one’s not true. My Dad got the same email and I had to advise him to care about more important things – namely ones that are true, more specifically the fact that the country’s being looted by the elites in this country.
May 15th, 2009 at 10:11 am
@marcus aurelius
Hey when the manure eventually hits the fan and WDC erupts into riots…
A little west of you (over the river in WVA) we’re waiting with our own pitchforks to keep all of the eventual migrant zombies looking for food & water off our land…
jk- Since YOU’RE a BP kinfolk, we’ll give you a pass, but tell your friends to stay put…
One thing that makes me laugh is the following…I’m not a religious zealot in any way shape or form…But if things EVER DO get truly bad in this country (for whatever reason – rioting, famine, nuclear blast, asteroids), you’re going to see this migration from large urban population centers (full of liberals), heading out to rural conservative areas (many of whom are conservative)…
I, for one, will do everything in my power to help whoever comes along, but it makes me chuckle to witness day in and day out how the RURAL mindset are a bunch of religious lunatics, but it is those people who will end up being gracious in times of catastrophe or if and when the “civilized” liberal world breaks down…
May 15th, 2009 at 10:16 am
[...] obligations to manage their assets prudently, require taxpayer largesse?” Barry Ritholtz writes at The Big Picture. he asks. “Yet even more moral hazard is being heaped upon [...]
May 15th, 2009 at 10:17 am
@Mannwich
Thanks Manny…I was skeptical about that…
See? At least that’s what this BP site does to people (regardless of whether you’re conservative or liberal)…It makes you QUESTION things…
I get these e-mails all the time from an acquaintance of mind that is all simply rhetoric blasting the LEFT…People blindly forward these things around without really digging to see what the truth is…
Both sides are equally guilty of spreading LIES & PROPAGANDA…
People have to do their own homework on things…
May 15th, 2009 at 10:24 am
Virginny! In Appomattox, some people still proudly display the Reb flag. When I ever I see it I pray to the Lord to make their teeth fall out (it almost always works, Thank You, Jaysus).
So anyways, when my purchase of DRYS makes me a gazillionaire (look it up- it’s there), I’m thinking of buying me a nice piece of property I’ve been eyeing for awhile.
http://www.monticello.org/gallery/house/exterior/eastfrontwalk.html
I will have to chase off some nutty people who keep talking about dumbwaiters and apple cider. Yankees, probably.
May 15th, 2009 at 10:39 am
cvienne:
For three years, I’ve been looking at farms in Canada. I’m looking in Canada for reasons I can’t even begin to go into here (primary is my ability to pay cash and own real, working ag land, outright, without spending everything I have. Prior to looking in Canada, I went from Maine to Florida, and as far west as Idaho. Price is way too high. I have kids and grand kids to consider). I’ve found a place which is separated from the mainland by a deep, wide strait. Great place to defend against the hungry hoards of zombies. I’m heading back to buy at the end of this month. I’ve narrowed it down to 2 properties:
1. 162 ac of pasture/woods, w/ and old farm house (liven in – not derelict) and barn for $119K CAD.
2. The other is a 99 ac., working sheep farm w/ a 160 y.o, house (also lived in), 2 barns, 30 ac. pasture, 80 ac. timber. $99K CAD. )BTW: You can’t believe a word those sheep say.)
Both have surface water and full mineral rights.
Taxes on each are less than $1000 CAD/year.
the area has good infrastructure (internet, roads, hospitals, WalMart, schools, fire dept., etc.).
No huge religious presence (at least, no billboards indicating such).
Canada/US offer dual citizenship.
Not palaces, but not a condo, either.
May 15th, 2009 at 10:40 am
MRegan:
Funny!
May 15th, 2009 at 10:40 am
OT:
cvienne,
ever been to Bluefield, West Virginia?
~~
past that, this: “Both sides are equally guilty of spreading LIES & PROPAGANDA…
People have to do their own homework on things…”– no doubt.
“People have to do their own homework on things…”– We should be so Lucky..
May 15th, 2009 at 10:41 am
MRegan-
definitely still see the Confederate flag- but it is the south after all- Monticello is also worth seeing- very pastoral- orchards and whatnot- but when you go through the mountains of Virginia- especially on foot- definitely an experience that will soothe a man’s soul-
quite poetic today
May 15th, 2009 at 10:43 am
MEH:
I looked at farms in Bluefield. Pretty place. Too expensive if you don’t want a mortgage.
May 15th, 2009 at 10:45 am
Barry,
One thing that comes to mind is this is just another way to use Fed dollars to bail out the individual states. I believe here in Texas – and I would assume in other states as well – that the state has a guaranty fund for insurance policies/annuities in the event of an insurance company failure. There is a limit (the level of which escapes me right now), kind of like FDIC deposit insurance but still, this dollar amount would likely swamp already strained state budgets which actually have to – in theory, at least – be balanced.
Just a little different way of looking at it. I certainly don’t agree with propping these companies up but this is another factor to consider.
May 15th, 2009 at 10:46 am
not to be unpopular, or anything, but, the Stars n’ Bars had Nothing to do w/ “Pro-Slavery” when it was adopted by the C.S.A. c.1861..
http://www.csacurrency.com/csaflag/csabflag.htm
http://www.csacurrency.com/csaflag/index.htm
May 15th, 2009 at 10:51 am
OT:
MA,
when in Bluefield, did you see any Pyramids?
~~
Mr. Sparkle makes a good point–”follow the path of the two-dollar bill”..
May 15th, 2009 at 10:52 am
to all you shorts out there-
do you feel that you are against all the USA’s ability to QE its way to prosperity, to provide liquidity to re-inflate assets at all costs-
I have a few shorts on- but really- I am starting to think I am David taking on Goliath- I cannot hep but envision that the banks are using all the ill-gotten bailout funds to drive the market higher- against all fundamentals-
I may have to take my marbles and go home- the bastards are cheating me
May 15th, 2009 at 10:53 am
Wildly OT:
I think we need a sound effect for GS doin’ its thing as SLP and buyin’ stocks “to maintain orderly markets.”
My first choice is a sci-fi “space generator” sound:
wah wah wah wah wah wah wah wah wah
Second choice would be an air compressor:
Pssssssssssssssssss
May 15th, 2009 at 10:54 am
Hoffer!
Don’t make me pray about yer teeth!
May 15th, 2009 at 10:56 am
@ahab: They’re cheating a lot of people. Reality will hit again sooner or later, probably later.
May 15th, 2009 at 11:01 am
hoffer-
when I see the confederate flag I am only reminded that I am in the South- nothing more- having said that it has different meanings to different people- so it may be insulting to some- and it may be used by others with the intention to insult another group- but I live in a State with many a confederate memorial- so the confederate flag is part of that history-
and I’m proud to be a Virginian
May 15th, 2009 at 11:05 am
MEH:
Maybe pyramids of coal.
May 15th, 2009 at 11:14 am
@MA
So you’ll be up there with Jim Rogers
Actually, I think you’re smart…I basically did the same thing you’re doing…I was lucky though to find a situation where I acquired a distressed property and paid almost nothing for it…
Got my own acerage
My own water
My own wind and solar energy
…dog
Growing food is fun…keeps you sane…
My only worry is that I’m still only about 70 miles west of Washington DC…So when the zombies come knocking, I’ll be the first property they come to…Yikes!
I’m already making up the list of “chores”…Food’s a plenty but you gotta earn your keep!
May 15th, 2009 at 11:16 am
Article from WSJ online back on April 8th
Apparently only insurers that own federally chartered banks qualify for TARP funds.
Some insurers as early as Q4 2008 bought some regulated savings and loans banks in order to qualify?
As Quoted From the Article
===================
First, many of the roughly two dozen insurers that dominate the variable-annuity business made aggressive promises on these popular retirement-income products, guaranteeing minimum returns, no matter what happened to the stock market. With the market’s decline, the issuers are on the hook for big payouts, though most of the payments won’t come due for 10 or more years. Second, the insurers also have lost money on the investments in bonds and real estate that back their policies.
Insurers own 18% of all corporate bonds outstanding, according to the American Council of Life Insurers, and investors have been warily watching trading patterns in some securities for signs of a liquidation. For example, a bond issued by Jeffries & Co., a securities firm, has fallen in value recently though the company is healthy. Traders have noted that the biggest holders of that bond are insurers.
Many life insurers also hold large portfolios of residential mortgage and commercial real-estate assets. While most of the assets are highly rated, further downgrades of those assets could put considerable pressure on insurers, forcing them to take additional write-downs.
====================================================================
May 15th, 2009 at 11:16 am
whoops…here’s the link to the WSJ online article
http://online.wsj.com/article_email/SB123914741752198971-lMyQjAxMDI5MzA5NzEwNDc3Wj.html
May 15th, 2009 at 11:17 am
Apparently wordpress has decided that ButtoMcFarty is just tooooo drrrrty.
And to think….I was gonna go with “Mr. ShittyLips McCrapStain”
WWOT
http://www.awkwardfamilyphotos.com
don’t miss the older entries at the bottom…..comedy gold….
Of course we are bailing out the insurance companies. They serve a higher purpose….unless it’s an “Act of God” of course. Just ask the folks in FL and New Orleans how helpful they are!!
http://www.consumeraffairs.com/insurance/allstate.htm
And….of course…..the obligatory music link….
http://www.youtube.com/watch?v=vApw12twgag
Happy Friday
May 15th, 2009 at 11:17 am
For three years, I’ve been looking at farms in Canada. I’m looking in Canada for reasons I can’t even begin to go into here (primary is my ability to pay cash and own real, working ag land, outright, without spending everything I have
————-
When the SHTF, TPTB (who live in cities and luxury) will control the farms. And they’ll squeeze the lemon making the farmers pay for the urbanites.
May 15th, 2009 at 11:19 am
[...] Why does the Federal government continue to make stupid choices with taxpayer funds…my money??? If companies don’t run themselves properly, if investors don’t make good investments, why do my tax dollars go to bail them out and put properly run and capitalized companies at a disadvantage? Check out the article here. [...]
May 15th, 2009 at 11:24 am
I’m sorry but during the last 30 years, savers have enjoyed the largest real returns in decades. If it weren’t for the spenders and the credit bubble many would not have the portfolios they have today.
I believe in frugality and self-control and I am disgusted with the excess but I am also sick and tired of hearing how the savers are getting raped.
Life’s a bitch and then you die. If you’ve had it better than that, thank your lucky stars because not that many in history have had our luxuries.
May 15th, 2009 at 11:27 am
@danm: Good point but what if one just recently became a saver over the past 4-5 years? Tough luck Chuck?
May 15th, 2009 at 11:33 am
@danm:
That’s the thought that moderates my agreement with a lot of the (mostly justified IMO) outrage here.
The glass is much more than half full when you add up all of the scientific, medical, and social advances over the last 70 years. Even if we are entering GD 2.0.
Sustainability is a big problem, yes, as is the need for two full-time wage earners and the pressure that puts on families. Wealth distribution in the US is despicable. Corruption, cronyism — check, check.
BUT when you look at metrics like available tech (electricity, phones, internet penetration, automobiles, etc.) , life expectancy, flow of information, people who would turn back the clock are FOS.
May 15th, 2009 at 11:36 am
Mannwich:
Either they are young and they still have a world of opportunities ahead of them. And if they are old and just started, then they get what they deserve.
Anyway, it’s all about real returns, not nominal ones. And real return have been out of this world for way too long. It’s only logical to exepct them to drop.
Savers complaining are just as greedy as the spendthrift risk takers, execting a free lunch.
May 15th, 2009 at 11:37 am
cvienne:
Great minds . . .
Glad to hear you’re living the real American dream.
May 15th, 2009 at 11:42 am
@danm: How is expecting more than basically 0% on savings being “greedy”? The banks and other irresponsible entities are basically getting free money at the expense of savers. I disagree with you there.
May 15th, 2009 at 11:45 am
@danm: To put it another way – in my 20’s, I was very irresponsible with credit but I paid it off slowly over time and do not carry any credit card balances. Over that time, my wife (who has always been a saver) and I have tried to save money by socking away little by little and being as frugal as we can. Now the feds with their policies are basically urging me (and everyone) to go back to those profligate spending days of my 20’s. How is that a good thing?
May 15th, 2009 at 12:01 pm
[...] why indeed are they getting money? Supposedly, because they need it but why is that where is the connection [...]
May 15th, 2009 at 12:09 pm
“Sustainability is a big problem, yes, as is the need for two full-time wage earners and the pressure that puts on families. Wealth distribution in the US is despicable. Corruption, cronyism — check, check.
BUT when you look at metrics like available tech (electricity, phones, internet penetration, automobiles, etc.) , life expectancy, flow of information, people who would turn back the clock are FOS.”
Transor,
w/this: “BUT when you look at metrics like available tech (electricity, phones, internet penetration, automobiles, etc.)” you might do well to wonder about “What you Don’t See”.
and, this: “Sustainability is a big problem, yes, as is the need for two full-time wage earners and the pressure that puts on families. Wealth distribution in the US is despicable. Corruption, cronyism — check, check.” is All, a piece.
“life expectancy” has more to do with improved Sanitation, than anything else.
“flow of information” don’t confuse Quantity with Quality, the signal-to-noise ratio has never been lower..
and, also, I luv your “turn back the clock” trope..nice touch~
http://www.thefreedictionary.com/trope
http://www.maxim-ic.com/glossary/index.cfm/Ac/V/ID/278/Tm/Signal-To-Noise_Ratio
May 15th, 2009 at 12:13 pm
In trying to gain insights into Obama’s thought processes, it pays to ask, what would Francois Mitterand do in this situation?
May 15th, 2009 at 12:21 pm
Marcus Aurelius @ 9:03
“I’d love to see Texas try to go it alone”
Frankly, I think they’d be much better off. Of course, it would have to be done with the blessing of the Federal government, which it would never get, because it’s too much of a “cash cow”. But maybe the Feds would let (for example) North Dakota go.
May 15th, 2009 at 12:32 pm
DL,
don’t underestimate ND, on the ‘food’ side alone, they could make it work, and, if it wasn’t for ‘the feds’, they’d be well-known for Oil, as well..
May 15th, 2009 at 12:34 pm
@Mark:
Actually, I think you and I are on the same page. I think arguing criminal inefficiency and a deliberately “lossy” information exchange is a completely valid basis for criticism. Analyzing the System on its own terms — A OK with me.
But most people try to frame things in terms of the Carousel of Progress and that’s where I turn off.
May 15th, 2009 at 12:41 pm
to Transor,
what does this: “But most people try to frame things in terms of the Carousel of Progress and that’s where I turn off.”
in relation to: “BUT when you look at metrics like available tech (electricity, phones, internet penetration, automobiles, etc.) , life expectancy, flow of information, people who would turn back the clock are FOS.” ??
May 15th, 2009 at 12:42 pm
DL:
TX couldn’t pull out of one hurricane catastrophe on their own. That aside, explain to me how they’d do without the NASA presence in Houston and the other defense monies they get. What’s left? Oil (very little, and we’d take refineries elsewhere), cows, and overpriced real estate.
May 15th, 2009 at 12:47 pm
@Mark:
Just that the notions that (a) people are much better off in 2009 than in 1939 America and (b) the current situation sucks (when analyzed for inefficiencies on its own terms) are not mutually exclusive statements. Both are true.
A lot of people make what I think is a logical error by saying the situation in 2009 completely sucks, therefore earlier times and values are better. I think that conclusion doesn’t follow.
May 15th, 2009 at 12:55 pm
Maybe the administration could just “sell” Alaska to the Chinese or something to pay off the trade deficit…
They’d rid themselves of Palin on into the future, and the Chinese would most likely be HAPPY to drill up the resources…
May 15th, 2009 at 12:56 pm
While they were at it, they could SELL Hawaii…
Oh wait, that’s BHO’s birthplace…
Or is it? I forget…
May 15th, 2009 at 1:05 pm
[...] From The Big Picture – Why Are We Bailing Out Insurers? [...]
May 15th, 2009 at 1:35 pm
danm: How is expecting more than basically 0% on savings being “greedy”? The banks and other irresponsible entities are basically getting free money at the expense of savers. I disagree with you there.
——————–
Don’t tell me you have not made capital gains generated by the soaring asset valuations thanks to lower rates.
If you are playing the market and expecting to make more than inflation that is also greedy since you are making money off other people’s backs. But of course our Western capitalist ideology has blinded us to that fact. We’ve actually convinced ourselves that if we all work hard enough we can all be in the top 1%! We’ve actually been brainwashed into thinking that we could all be the owners of capital and the means of production. What a farce! When everyone participates, it’s called socialism… and you get returns = to GDP growth. Even if you never believed in it and just wanted to make sure you yourself were in the top 5-10%, that’s greedy. Greed is basically wanting more than your fair share. Look at what you have compared to everyone in the world, can you honestly say that you got less than your fair share (brains, looks, love, opportunities, money…)
I’ll admit that I am more greedy than I’d like to be but deep down I don’t care about the 0% because I know I’ve had a free lunch. And I know you can’t win them all; you have to leave some for the others unless you want to get your head chopped off or live on an Island all by yourself surrounded by your body guards, always expecting one of them to poison you.
Also, I’ve been looking at the real returns for years expecting them to drop. They were due to come down or go negative so for me it is no surprise.
I’m 40. I can’t believe how lucky I’ve been up to now but I don’t expect it to be easy in the future. I’ve read enough history books to know that things can change on a dime. Fortunes can be lost easily no matter how careful you are. Life is not fair. If you don’t accept that, you are setting yourself up to be a very frustrated person.
The 2 things I have been focusing on the most are my skill set (making sure I can always be of value to someone), and the people around me (making sure someone will support me if I get sick).
May 15th, 2009 at 1:35 pm
Transor,
this is an interesting point: “…than in 1939 America”, as opposed to, say: 1899, 1913, or 1929..
but, no matter.
I hear your pt.
but, you should, still, wonder about what “We don’t see”, from a “Technology” POV, at the min.
May 15th, 2009 at 2:01 pm
Marcus Aurelius @ 12:42
I’m not pretending to be an expert on the Texas economy, but as I understand it, they’re doing better than most other states. Their unemployment rate is low, and taxes are low. Yes, they have oil, and I don’t see why the refineries would leave. They have a few tech companies also.
During the last presidential campaign, many were saying that Texas trades a lot with other countries.
What I don’t know is how much money Texas residents send to Washington versus the amount that they receive.
Also, you’ve got to consider where Federal taxes are going in the future…. I’m guessing UP. If Texas were a separate country, they’d have their own tax policy and monetary policy. There’s a case to be made that Texas would be better off as a separate country.
May 15th, 2009 at 2:20 pm
@Mark:
Yes, I hear you too. A lot of people wonder about the existence of medicines that cure (as opposed to merely treat) gathering dust, “The Formula” for synthetic fossil fuels buried in a vault, Who Killed the Electric Car?, and in general why lightbulbs and razor blades aren’t all long-lasting.
But I know too that you are also concerned about “spooky tech” becoming ever more invasive in the name of law enforcement/public safety efficiencies. This is one of my favorites from the “what you don’t see” department:
http://www.i-swarm.org/
May 15th, 2009 at 2:30 pm
Transor,
see: Project started on 1.1.2004 Project terminated on 31.6.2008 Last modified: 15.01.2008
from your link..
one of those things is not like the other..
May 15th, 2009 at 2:44 pm
June had 31 days last year. Didn’t you get the memo?
Dispersed arrays of audio receivers with micro power sources. Mobile. Audio upload to satellite. Audio download to computer w/ voice-recognition software (remember it isn’t a privacy violation if it’s done by computer). Scan for red-flag words and voice identification. Print report with time code for human audio replay.
New meaning to the word “bug,” eh?
May 15th, 2009 at 3:53 pm
ie Texas…..love San Antonio and Austin…..the rest is just Southern Oklahoma….
It’s all fun and games until you run out of freshwater. Desalination is very expensive/inefficient.
That’s why I think all the areas bordering the Great Lakes are very attractive areas….and will be getting MUCH more valuable over the next few decades.
JMO.
May 15th, 2009 at 8:18 pm
VennData: “Oh, and one national regulator for insurance. Why all the wasteful duplication of effort times all fifty states? It’s a monstrosity.”
Except that the state regulators, in aggregate, managed to regulate insurers better than your “one-national-agency” idea did for banks. Diversification of regulation is a fantastic model as it 1) makes it harder (more expensive) for the industry to capture, especially a small number of too big to fails and 2) makes it so when some prick creates poor policy, only his state suffers the consequences (instead of the entire nation).
It takes a lot more work for the crony capitalists to create a gigantic systemic risk when they have to lobby 50 separate regulators than it does to lobby 1 big regulator.
May 16th, 2009 at 12:16 am
I just made this for ya’s in TBP
http://www.youtube.com/watch?v=CwqxFHB0kZI
A patriotic compilation of high school band music .. (Illinois) Ottawa High School class of 1977 .. top tier band.
One Nation, Indivisible & Star Spangled Banner
narration by Everette Lunning – OHS English dept.
Testiment of An American
narration by John Kinnison – Ottawa Grade School Band director
My brother Keith, played percussion in these selections, my trumpet was in the 2nd tier band.
May 16th, 2009 at 7:17 am
Not so sure about the annuities/pensions angle. What’s the acronym for I Am Not an Insurance Analyst?
But my understanding is the annuity money is, in a sense, firewalled. Somebody like a Lincoln National is kind of a fund-of-funds manager that disperses the annuity money to funds at other companies.
On the secession issue, it would solve a lot of problems if we could just convince Florida, California, Arizona and Nevada to secede.
May 16th, 2009 at 3:49 pm
[...] Why Are We Bailing Out Insurers? – Barry Ritholtz, Big Picture [...]
May 16th, 2009 at 7:42 pm
I’m really surprised nobody here wonders about CREDIT DEFAULT SWAPS on the insurers, who owns them, another Goldman-at-par payout in the works? JPM?
May 29th, 2009 at 7:33 am
[...] why indeed are they getting money? Supposedly, because they need it but why is that where is the connection [...]