<div>"Right or left wing, conservative or liberal, are political stereotypes to<br>manipulate the public to pursue an agenda based on maximizing wealth and<br>power for a economic elite, now expressed in a multinational globalized<br>
economy."</div>
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<div>Ted Moffett, writing on Vision2020, Tues. Sept. 2, 2008:</div>
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<div><a href="http://mailman.fsr.com/pipermail/vision2020/2008-September/055835.html">http://mailman.fsr.com/pipermail/vision2020/2008-September/055835.html</a></div>
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<div><span class="gmail_quote">On 10/25/08, <b class="gmail_sendername">Art Deco</b> <<a href="mailto:deco@moscow.com">deco@moscow.com</a>> wrote:</span>
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<h2>Bailout expands into insurance </h2>
<h4>Government would take equity stakes in several companies</h4>
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<p><span><a onclick="return top.js.OpenExtLink(window,event,this)" href="http://www.spokesmanreview.com/news/bylines.asp?bylinename=David%20Cho,%20Binyamin%20Appelbaum" target="_blank">David Cho, Binyamin Appelbaum</a></span> and <span><a onclick="return top.js.OpenExtLink(window,event,this)" href="http://www.spokesmanreview.com/news/bylines.asp?bylinename=Zachary%20A.%20Goldfarb" target="_blank">Zachary A. Goldfarb</a></span><br>
Washington Post<br>October 25, 2008</p>
<p>WASHINGTON – 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.</p>
<p>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.</p>
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<td></td></tr></tbody></table>Government officials worry 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.</p>
<p>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 Paulson 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.</p>
<p>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.</p>
<p>The government's power to choose winners and losers in the crisis was illustrated Friday 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 will become the fifth-largest bank in the country by deposits.</p>
<p>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 Friday that the company would likely need more taxpayer money than the $123 billion in rescue loans the government has provided, according to two sources familiar with the private talks.</p>
<p>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.</p>
<p>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 of New York and AIG declined to comment Friday on the talks or to characterize AIG's situation.</p>
<p>"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.</p>
<p>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.</p>
<p>"The big problem is whether the resources they've got available are sufficient as they expand to more and more sectors," said Roberton Williams, a budget expert at the Urban Institute. "Now that they're going to expand to certain insurance institutions, is there enough money to cover that? And what would be the next domino to fall?"</p>
<p>The Emergency Economic Stabilization Act approved by Congress and signed into law Oct. 3 permits Paulson to invest in any financial institution, including insurance companies. But when Treasury drafted rules for spending the first $250 billion to recapitalize banks, the program was limited to banks and bank holding companies. In order to buy stock in insurance companies, Treasury officials would have to redraft the rules for the program or create a new one.</p>
<p>Insurers lobbied federal officials for inclusion in the program, arguing in part that it would "level the playing field" between banks and insurance firms. An industry trade group and several insurance companies have met with Treasury officials to discuss participation, industry sources said.</p>
<p>Several insurers Friday emphasized that their industry is less vulnerable to the mortgage-backed securities and other complex investments that have damaged the balance sheets of some banks.</p>
<p>A recent report by Goldman Sachs noted that many insurers are struggling to raise enough capital to keep their credit ratings and meet regulatory requirements. Several major companies report earnings next week, putting their problems on public display.</p>
<p>"These people are not in the same precarious position as AIG, but it would still be prudent for some of them to take on additional capital," Donn Vickrey of Gradient Analytics said. "Given how large the losses are and how long they've been building, they're running out of time."</p>
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