Big insurers finally get to game the bailout, see stocks soar
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While some U.S. stock futures slipped this morning, after Tuesday's slump, The Hartford rose 15 percent in pre-market trade.
Sure enough, the market opened higher (on the news of government aid for life insurers and of a big merger of homebuilders), proof that all the Obama Administration has to do to bring us out of the recession is bail out a big corporate sector every day for next year or two. That should do it.
No accident about the bailout of the life insurers. Investors were giddy before the bell about the Wall Street Journal's report this morning that the Obama Administration plans to at last let life-insurance companies join the banks and automakers at the trough. Like the banks, the insurers are being bailed out for their poor investments — not in bets on your lives but on corporate bonds and securities. Not all the big life-insurers made reckless investments; not all will be bailed out.
AIG is (or was) the world's biggest insurance company when it suffered a near-death experience last year and was bailed out. The big life-insurance companies saw a good deal for having the public rescue them for poor investment decisions.
Like eager homesteaders who lined up almost exactly 120 years ago (April 22, 1889) to race into "Indian Territory" to snap up free land in what eventually became Oklahoma, the insurers have been impatiently stamping their cloven hooves. They've been preparing for this day for months by snapping up S&Ls so they can qualify for TARP money. The WSJ story, which is more than charitable to the industry, notes that the Bush Administration worked out that strategy last fall with the insurers.
The entire life-insurance industry is not suffering, mind you. Only the ones that made bad investments that had little to do with the bets they routinely make on your lives. The WSJ explains:
Not all insurers have been openly struggling, and some retain triple-A ratings, including Massachusetts Mutual Life Insurance Co., New York Life Insurance Co., Northwestern Mutual Life Insurance Co. and TIAA-CREF.
Life insurers hold more than $1 trillion in corporate debt and, Bloomberg reports, "North American insurers have accumulated more than $190 billion in losses and writedowns tied to the collapse of the U.S. mortgage market since the beginning of 2007."
