The Wall Street Journal has an article on how life insurers are now buying small savings and loans to qualify for TARP money. Lincoln National Corp.'s acquisition of a small savings and loan institution in Goodland, Ind., called
Newton County Loan & Savings FSB for $7.3 million, which qualifies it for $3 billion from the government, was only the start. Another insurer, Hartford Financial Services Group, acquired Federal Trust Corp. for $10 million to attempt to get a $3.4 billion of U.S. capital, and struggling insurer, Genworth Financial Inc., agreed
to buy Minnesota-based InterBank fsb so that it too could qualify for government funding. Lastly, Aegon,
a Dutch insurer that got €3 billion ($3.8
billion) from the Netherlands last month, may purchase Suburban Federal Savings Bank of Crofton, Md., to get in on U.S. government funding as well.
Wait a minute. Is our government now paying international players to acquire banks too? Apparently so.
Insurers are all jumping on the bank holding company bandwagon following the bailout of American International Group Inc., with institutions such as GMAC, CIT Group and American Express Co. all lining up to become bank holding companies to get their hands on some of the $700 billion.
Some insurers, such as Prudential Financial and MetLife Inc., already have bank status, yet have not announced if they have applied for government funding. But with lines of those that are applying reaching around the block, some are calling for something to be done.
"It's perverse,'' said Jason Arnold, a San Francisco-based
analyst at RBC Capital Markets, told
Bloomberg. "Almost anyone can buy a thrift.
At a certain point, regulators will have to put a stop to it.''
While it is understandable that life insurers -- who are among the biggest holders of the nation's corporate debt, with $1.3 trillion on their books, according to The Wall Street Journal -- want to recapitalize too, it may cause even more confusion in defining TARP qualifications and light a spark on other complicated questions. First the government just added stricken nonbank lenders and other financial
businesses to the list of institutions that will get direct federal aid under TARP. Do insurers qualify as financial institutions? If life insurers can apply, then can health insurers or property and casualty too if they acquire savings and loans? With Barack Obama in office, there will be some
definite changes in the health insurance industry. So what could happen there? Could this prompt a re-examination of regulation of the insurance industry as well? Insurers are state regulated, but with
federal money owning stakes in life insurers, could a federal regulated insurance industry be on the way?
While there are certainly many questions to be asked, it seems likely there won't receive solid answers until the White House gets its newest tenant. -
Maria Woehr
Soon every type of institution will be acquiring banks to convert into a bank holding company in order to qualify for infusions from the government under the $700 billion Troubled Asset Relief Program. Right? But do they need to under Paulson Plan B?
