Insurance companies get cleared for TARP bailout funds on bad investments

May 15, 2009 by · 1 Comment
Filed under: Stock Market News 

We knew this was coming, and pensions are next in line.   Many of these insurance companies used a lot of this toxic assets as fixed income securities that would help the insurers keep their obligations.  At this point, everyone is going to get a bailout in the financial industry so I think that inflation is really going to be the next issue to deal with if this turn around recovery works.  If not then we will see many banks and insurers go bankrupt but that seems unlikely with the actions of this administration to safeguard our present financial oligarchs at all costs, even devaluing the dollar.

News (Bloomberg):

Prudential Financial Inc., Hartford Financial Services Group Inc. and Allstate Corp. are among six insurers approved by the U.S. government for bailout funds after investment declines eroded capital across the industry.

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Bank of America Needs to Raise $33.9 Billion in Additional Capital

May 6, 2009 by · Leave a Comment
Filed under: Industry News 

Well we will see how these “stress test” results look on Thursday.  I have heard anywhere from 10 to 16 of the 19 biggest banks we need to raise additional capital to maintain an adequate reserve ratio.   The problem I have with these tests are the fact that if you look at the criteria of the tests, they really painted a recovery this year and an additional 7 to 15% decline in housing prices.  

Maybe we can keep good economic numbers while we have all of these government backed programs to prop up our failed financial system but once those need to be reigned in and all that cash that has been pushed into the system, starts to flow around.  I believe we will be in the same position as last October or even worse.  I guess we can keep our fingers crossed and our guns loaded?   

News (NY Times):

The government has told Bank of America it needs $33.9 billion in capital to withstand any worsening of the economic downturn, according to an executive at the bank.

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U.S. bank bailout extended to life insurance companies

April 8, 2009 by · Leave a Comment
Filed under: Policy News 

The depth of this situation is now coming into focus.  What has basically happened, is the life insurance companies who normally are very risk adverse in their investing got caught up in investing in dodgy “other assets” that carried a “AAA” credit rating.  Now because we have realized that these were not “AAA” but in fact junk debt, the insurance companies are in a hole to provide adequate coverage to their policyholders (according to the insurers).  

Commercial real estate has to be the next bailout target, I know personally that many of these insurance companies and pensions invested heavily during the boom times in commercial real estate and sercurities based on commercial real estate.  To be continued…..

News (Reuters):

Shares of U.S. life insurance companies rose broadly on Wednesday on a report that the government may widen a funding program for troubled financial companies to include insurers.

The U.S. Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift in its capital injection program, The Wall Street Journal reported, citing people familiar with the matter.

Shares of Hartford Financial Services Group Inc climbed more than 30 percent to as much as $11.35 in early morning trading, from $8.45 on Tuesday.

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Treasury demands banks with TARP funds to report lending

January 20, 2009 by · 1 Comment
Filed under: Legal News 

Funny that is it was bad lending and reserve practices that got us in this mess and now we want the banks to resume that activity to try and start a recovery.  The problem is with job losses mounting, more debt for the average citizen is not the answer.  We need to stabilize incomes and create jobs before we start discussing a recovery.  TARP was a bad idea from the beginning when we decided to abandon the free markets right when we were in need of them the most.  Banks are doing what they should of done in the first place, lend to credit worthy borrowers.  

News:

The U.S. Treasury, under pressure to revive lending, is demanding monthly reports from the banks that received the most capital from the government’s $700 billion rescue program.

Neel Kashkari, the official who administers the Troubled Asset Relief Program, wrote to Citigroup Inc., Bank of America Corp. and 18 others on Jan. 16 seeking figures on business and consumer loans. Treasury also wanted details on purchases of mortgage-backed and asset-backed securities, according to documents obtained by Bloomberg News. Kashkari will stay for a few months after President-elect Barack Obama is sworn in today.

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Banks’ ‘Catatonic Fear’ means consumers don’t get TARP (Any) relief

January 5, 2009 by · Leave a Comment
Filed under: Industry News 

No doubt, with the direction the economy is going, it is no surprise that now banks are tightening their lending standards because borrowers are becoming less and less credit worthy.  How could I make a loan to someone that might lose their job tomorrow and have confidence it will be paid back?  You don’t and that is why all this credit is being given out but not extended.  Until we let this markets take their course this problem will not go away at all.

News:

As the new owner of $172.5 billion of preferred shares and warrants in 208 U.S. financial institutions, the Treasury Department hasn’t succeeded in thawing frozen credit markets, leaving taxpayers propping up an industry that won’t lend to them.

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