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Thread: Treasury Department now set to bailout INSURANCE COMPANIES

  1. #1
    Friend of Gossip Rocks! buttmunch's Avatar
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    Default Treasury Department now set to bailout INSURANCE COMPANIES

    [QUOTE]The Treasury Department is dramatically expanding the scope of its bailout of the financial system with a plan to take ownership stakes in the nation's insurance companies, signaling new concerns about a sector of the economy whose troubles until now have been overshadowed by the banking industry, government and industry sources said.

    Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers.

    Government officials worry that the collapse of a major insurer could further destabilize the financial system because of the crucial role the companies play in backstopping a wide range of financial transactions, although the direct impact on holders of car, life and other insurance policies would be modest, industry officials said.

    The new initiative underscores the growing range of problems that Treasury is scrambling to address with the $700 billion allocated by Congress this month. The shape of the plan has changed repeatedly since Treasury Secretary Henry M. Paulson Jr. introduced it last month as an effort to rescue banks by buying their troubled mortgage-related assets. That original mandate has now been pushed aside by a plan to take equity stakes in banks and insurance companies, and other businesses are lobbying to be included.
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    The government has been forced to expand the plan partly because the federal guarantees previously given some institutions, such as banks, have put other companies and financial sectors at a disadvantage, making them less attractive to uneasy investors.

    The government's power to choose winners and losers in the crisis was illustrated yesterday when the Cleveland-based bank National City was forced to sell itself when regulators turned down its request for a Treasury investment after deciding the firm was too weak to save, according to people familiar with the matter. Instead, the Treasury gave $7.7 billion to PNC Financial Services Group to help buy National City. It did not require that the money be used for new lending, the stated purpose of the government plan. PNC, which has a major presence in the Washington region, would become the fifth-largest bank in the country by deposits.

    Treasury officials yesterday backed away from plans to publicize a new round of investments in about 20 large regional banks over concerns that firms not on the list would be perceived as unhealthy and punished by investors. Capital One of McLean, SunTrust of Atlanta and KeyCorp of Cleveland are among the banks that will receive government funding, according to people familiar with the matter. Other banks are now free to make their own announcements, as PNC did yesterday.

    The cost of saving the country's largest insurer continues to rise. Senior managers at troubled insurance giant American International Group warned the Federal Reserve yesterday that the company would probably need more taxpayer money than the $123 billion in rescue loans the government has provided, according to two sources familiar with the private talks.

    AIG is having a painful time trying to pay off bad bets it made guaranteeing other companies' risky mortgage investments, which have lost much of their value. Five weeks after the government launched an unprecedented bailout to save the private company from bankruptcy, AIG has so far burned through $90.3 billion of government credit.

    The troubles at AIG highlight the difficulty of rescuing insurance companies after they begin to unravel. Each week, AIG has faced multimillion-dollar collateral calls to pay off the mortgages and other assets it guaranteed, sources said. The calls were triggered largely because AIG's credit rating was sharply downgraded. The Federal Reserve Bank of New York and AIG declined to comment yesterday on the talks or to characterize AIG's situation.

    "In light of worldwide economic and financial conditions, we are in constant conversations with the Federal Reserve," said AIG spokesman Joseph Norton, who offered no further comment.

    The move to rescue other insurers raises questions about how much the government will need to spend to prop up the insurance sector and which part of the nation's financial system might need help next.
    Bailout Expands to Insurers - washingtonpost.com

    Are they bloody serious? Insurance companies have been screwing Americans since before Adam and Eve and now they've got their hands in the till as well? Un-fucking-believable.
    'Those who sacrifice liberty for security deserve neither.' Ben Franklin

    "When fascism comes to America, it will be wrapped in the flag and carrying the cross."
    --Sinclair Lewis

  2. #2
    Elite Member kingcap72's Avatar
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    The insurance companies want a bailout? Figures, every other industry is looking for a bailout from the taxpayers.

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    Friend of Gossip Rocks! buttmunch's Avatar
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    And the taxpayers are slowly screwed again.
    'Those who sacrifice liberty for security deserve neither.' Ben Franklin

    "When fascism comes to America, it will be wrapped in the flag and carrying the cross."
    --Sinclair Lewis

  4. #4
    Elite Member kingcap72's Avatar
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    Pretty much. Just another thing to add to Dubya's legacy.

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