Bush Moves Towards Nationalizing the Insurance Business

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

http://www.macpac08.com/2008/09/mccains-attempt-to-fix-fannie-mae.html

 

Congress is very much involved. Just listen or read all the pontification going on. Just go back several decades and review the requirements of the laws they've produced. You can't loan money to people who can't pay it back and expect to make a profit. Social engineering doesn't change credit risk. Do you remember when you actually had to have some credit worthiness to borrow money especially for a home mortgage? Do you remember how difficult that first home purchase was? What happened to change all that? If you invest in companies that do this - which is what you do when you buy their stock - you're taking a higher risk that you should and when the borrowers stop paying you're going to get burned. That's what's happening to AIG and, thereby, to the owners of AIG. Congress helped grow this monster and they're busy growing some more right now even as the existing ones are out of control. They're trying to figure out how to spend some more of our money to cover the past mistakes and do some more social engineering in the process. They're idiots! We're idiots if we believe they're not and if we continue to seek solutions from them. Add to all this the resulting business greed of many companies to get rich quick off easy credit and we've had the formula for failure for a long time. Isn't that also part of what fuels some of the other resistance to doing what's right with illegal immigration? Some people make lots of money of these issues. If a few businesses fail because of this the lesson will be learned and maybe we can get back to only loaning money that will be paid back. In the mean time they'll be some really good deals on real estate for those that can actually afford it. It won't fit the social engineering model some would like.

 

You bet I understand it and that's exactly what should happen! If it can't pay its bills it should go to court and seek protection under existing bankruptcy just like any one of us would have to do. The court would then approve an appropriate plan to either restructure or liquidate. The owners - including all the stockholders - would certainly be hurt by it - there just about last in line - but that's the risk of investing in a business that buys the paper of other companies that loan money people decide not to repay. Those lenders knew the borrows were higher risk. The borrowers knew it as well. The government encouraged it with they're social engineering ideas to make mortgages more affordable to low income families. They encouraged all the crazy financing being offered such as zero down payment, adjustable interest rates, etc. and much lower debt to equity and income ratios than were once required. What happens to a company when its debt to equity ratio gets too high? Their credit rating gets lowered and they have to pay much higher rates for working capital. Then they can't make ends meet. Then their investors start dumping their stock. That's how it's suppose to work! It's not the responsibility of you and me to cover those losses. Government just offers an excuse for everyone involved. It's a bad idea and the precedence has no limits. Do you understand this?

 

Congress has abandoned the American people at this time, simply declaring that they had no idea what to do. They have simply abdicated their responsibilities and are leaving everything up to "George".

They carry a large share of the blame for what is happening, but they have no interest in helping solve the problem.

 

This way they can always wait to see how it turns out and then blame him if it turns worse or take credit - perhaps a bad word in this case - if it turns better. They're idiots and we keep sending them their to "represent" us!

 

Your PDS is increasing.:laugh:

 

The total is up to $700 billion now! $700 Billion Financial Bailout You can just kiss at least $10,000 of your money good bye! (That's just a rough guess based on about one in four of us paying any taxes.) How do you like turning over $10,000 to pay for someone else's poor judgment? How do you like giving the government the ability to decide what to do with your $10,000 that you worked to earn, invest, and keep for the future when you and your family might need it? This is stupid and will usher in a new era of government control of business and more dependancy upon them to protect and save us from every conceivable problem including bad business investments. They'll have the keys to your business and home as well as your bank account before it's over.

 

I take it this was posted before the latest facts of how the Hill is working together to find a solution to this crises. I agree Congress is part to blame for this mess but but Bush was at the wheel the last 8 years. Unfortunately, by it's design, Congress is the worst group to look to for a fix. That party crap and going back and forth is a large part of how we got in this mess.

Bush, in the executive branch, has the last say so and is the best, fastest avenue to developing a plan for recovery. I am glad he has reached out to leaders of both houses and jointly they will present something that should be voted into law without much opposition.

 

I say let the parties directly involved figure out the recovery plan - in bankruptcy proceedings if necessary - and pay for it. The less Congress and the President has to do with it the better.

 

I am not sure you understand what I am saying.
Prior to this, AIG was not considered a speculative investment, and was considered to be a strong insurer. Using the insured as an example, the person buying an insurance policy (through AIG, in this particular case), is making an attempt to manage risk, not taking risks. In other words, the idea that they were taking risks is not a valid argument.

 

This is simply not true. What responsibility did Congress have? Who in Congress decided to leave it up to "George?"

If this is correct: then the GOP-controlled Congress prior to 2006 definitely shares in the blame, moreso than the current Congress.

 

AIG is more than just an insurance company! Its businesses include insurance, financial services, and asset management. It even owned a natural gas pipeline at one time!

Individuals insured by its policies are not in danger of immediately loosing their coverage. State laws provide means of dealing with such situations. Their polices would be assigned to a state agency or other insurance company to provide continued coverage for some reasonable period.

Insurance companies, however, often do have a financial services branch - a separate entity from the insurance branch - that offers people various investment opportunities including the infamous "annuity" that banks like to peddle for them. Those are financial investments and people know it when they invest in one even if they may not fully understand all the risk. People are educated by government schools and they don't learn much about personal finance - they learn that the government is suppose to take care of them from craddle to grave. Regardless, all investors - large or small - have to assume the risk of thier investments. No one makes them invest their money! They have the option to ask questions, to research the risk verses benefit, and to choose what's best for them.

We - through our government - are not responsible to make every investment that fails whole. There's no end to the cost of such a precedence!

 

We don't need a bailout.

Read this (even though I started a thread on it, it's worth repeating)

http://michellemalkin.com/

 

This is another result of the govenment's attempt at social re-engineering!

 

Trust me: I am very aware of AIG and their businesses. I am in the industry.

This is a direct result of government intervention. What makes you think that the state agencies are capable of assuming these policies? Moreover, who do you think will pay for this guarantee?

Again, this has nothing to do with those who purchased insurance policies through the company. Based upon the information you are furnishing here, you are specifically referring to the stockholders. Nobody is disputing the fact that they are taking risks. But I heard the person who will be in charge for the government on NPR last week, and he made it clear that those who purchased stock are at the back of the line. Most likely, they will lose their entire investment.

Who is suggesting that this should be the case? I haven't seen anyone do this. I am sure that if you asked those who purchased Bear Stearns or Lehman Brothers stock, they would note that they weren't bailed out. The stockholders at AIG will most likely meet the same fate.

Regards,
BiR

 

You're kind of repeating some of my own points here! Tell me about loosing my entire investment! Ha! Stock holders are always at the end of the line! There's nothing new about that!

The case has been made that the bailout is necessary to protect the investors. That's where I say the investors are own their own having assumed the risk of the investment.

The crisis is not with the payment of insurance claims! The states regulate the insurance business. They're the ones that have to figure out how to deal with any problems that might result from this. It can and should be done without federal involvement.

What's being proposed is a federal bailout - a purchase of something that's worth nothing with good money - using tax payer money. When you buy something that's worth less than you pay for it that can't be a good deal! If it were a good deal then some private investors would want to buy it.

If the lenders are holding worthless paper that's their problem. If the borrowers can't make their payments that's their problem. Neither is or should be the problem of the tax payer or those of us who aren't holding worthless paper or who have made our payments. The losers should be those that made the bad deals. That's what bankruptcy and foreclosure proceedings are for.