Insurers Jump on TARP Despite Concerns

Part of the congressman's release said the following:

"A few outlying critics of the bill, who believe that the federal government should have no role in the field of insurance whatsoever, used the recent AIG government intervention as an opportunity to obscure the progress we have made on creating an Office of Insurance Information within the Treasury Department. This is a 'hear, see and speak no evil' approach to governance. It is foolish and unwise.

"Without question, the business of insurance affects our national economy, and increasingly the global economy. The AIG situation demonstrates that fact clearly, as did the turmoil in the bond insurance industry earlier this year. To make informed policy decisions, the Administration and the Congress need to have better access to insurance expertise. We also need to work to assist state insurance regulators, especially in the international arena. H.R. 5840 does just that."

So Paulson appears to have his supporters, but the opposition is extremely vocal. Florida Insurance Commissioner Kevin McCarty said in September:

"I am very concerned and deeply troubled by U.S. Treasury Secretary Henry Paulson's comments on Sunday's NBC program 'Meet the Press' as well as by comments from various trade associations suggesting that the current AIG saga reinforces the need for a federal office to regulate insurance companies. Mr. Paulson has done a heroic job of stabilizing the financial markets in recent weeks; however, the facts of the matter regarding the AIG crisis clearly highlight that the state-based system of insurance regulation employed in the United States has actually worked in this case -- as it has in the past and will in the future -- to lessen the systemic impact of financial distress in the world financial markets."

The question remains that if an insurer brings itself under partial federal control through its own actions, will Paulson choose to support a request for TARP funding because insurers will inadvertently be giving succor to his own master plan of federal oversight for insurance companies? It certainly will be easier to achieve with more companies already partially there.

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