Insurance Company Bailouts May Be A Common Trend
Will insurance company bailouts occur this year? I received a question a few days ago in response to my post in reference to insurance companies receiving bailouts. There was an article a few days ago in the National Underwriter that refuted the concern that insurance companies would be receiving bailouts. My answer is Yes and No.
It is true that insurance companies did not receive direct bailout funds. However, the insurance companies lined up to buy banks or holding companies or to start holding companies. The Department of the Treasury allowed the insurance companies to acquire or start up holding companies that qualify as a bank for the bailout funds. Why was this done?
During the 1970’s the Glass-Stegall act was basically overturned. This allowed banks and insurance companies to spread their investments into owning each other. Many have said this eventual repeal of the Act caused the recent financial crises.
Holding companies and banks were allowed direct access to the TARP funds. The insurance companies could then receive TARP funds indirectly. There are no regulations on how the holding companies or banks are to use the funds.
The answer to the question is the carriers did receive the bailouts indirectly – how much we may never know for many years.
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