Life insurance markets look to feed at the Treasury trough

In what is one of the more stunning stories i've heard come out of the " Capital Market Bailout" also known forever forward by me as welfare for wall street, it was revealed over the weekend and early this week that some of the biggest names in the life insurance community are being enticed by the Treasury savants who have created this mess with "capital infusions".

As reported in the NY Times and The Wall Street Journal, the Treasury bail out crowd is looking to juice the capital positions of companies such as Metropolitan Life, Prudential Life and others so that they can " start the lending process again."

With all due respect to the parties involved, are you guys nuts?

The articles go on to report that Met Life, Prudential and NY Life all have solid capital positions and are in no risk of financial problems, but yet Treasury is twisting arms and trying to get these private businesses to accept Treasury money so that they start lending and investing in bonds again in an attempt to get the markets unstuck. More specifically they want to provide the capital to purchase, and I am not making this up, the subsidiaries of AIG that are coming up for sale.

Thankfully today's article removed the taint from NY Life, a fine mutual company that will ride out the current issues due to it's conservative investment profile and general agency and mutual insurance structure. NY Life clarified they had been approached by Treasury to assist with ideas and suggestions but they were not interested in taking capital from the government, aka as The TaxPayers.

Apart from the general idiocy of first bailing out AIG with tax payor money and then giving the buyers of AIG tax payor funds to purchase the AIG units, what in the world are the life markets thinking to get into bed with the Treasury and Federal government to take capital and purchase AIG subsidiaries?

Maybe they didn't see the congressmen and women declaring that " we own AIG " raking executives over the coals on costs, sales programs, conventions and lobbying.

Maybe they don't see the daily requests from the House oversight committee for more information on their corporate affairs.

Maybe they didn't notice the fine job Barney Frank and the banking committee did with Fannie Mae and Freddie Mac.

If I were a stockholder in any life insurance company that willingly and foolishly took money from the Treasury just to finance the purchase of a life company or subsidiary they could purchase with their own capital or resources, I would run for the hills.

I am hoping the life companies come to their senses, tell Treasury to take a hike and let them clean up their own mess. If the AIG markets and subsidiaries are worthy investments, let the companies decide with out the artificial cash provided by a Treasury desperate to validate their take over of AIG.

Don't do it guys, you'll regret it for years. Keep the Fed's out of your business or you will be the next one's lined up in front of Congress and answering their absurd, politically motivated questions.

Posted on October 28, 2008 .