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Insurers losing out on chunk of TARP
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TEXT OF INTERVIEW
Bill Radke: Some of the billions that the federal government is spending on AIG are coming from the TARP, the Troubled Assets Relief Program. The TARP is sometimes referred to as a federal bank bailout, but it was meant to include the insurance industry. When President Bush’s Treasury Secretary, Henry Paulson, announced the $700 billion package, he encouraged insurance companies to apply.
Frank Keating is president of the American Council of Life Insurers. So Frank, what happened to the insurance bailout?
Frank Keating: Well, that is, that’s the imponderable, that’s the big question mark. Because last fall, the Congress specifically put the insurance industry in the bill, and we had a series of meetings at Treasury. And the problem was, well, since you’re state regulated, how do we . . . “I wanted it to happen,” Secretary Paulson said, “but I wonder how we’re going to do this.” And we pretty well agreed that if they bought thrifts or banks, the federal government would understand what they’re all about. So out of some thousand life insurance companies, 13 applied — one with drew application, but since then, it’s been silent. Which is certainly troubling to us, because we’ve invested in some cases heavily into the thrift business in order to be entitled to be considered, and the phones do not get answered.
Radke: You know that critics say that that $700 billion bailout package was meant to save the banking system, not life or property insurers. Why should you get the money?
Keating: Well, the life insurance industry . . . the banks are $15 trillion, the mutual funds $10 trillion — the life insurance industry, $5 trillion. We have $2 trillion in long-term bonds, most of our investments our 20 years plus. The industry is hugely significant to the progress and the success of the financail economy, and the Congress saw that. The Treasury Department, quite truthfully, saw that as well, but because we are state regulated, it’s out of sight, out of mind, and we think that’s distressing.
Radke: If life insurers are shut out of that rescue money, what’s the impact on policy holders?
Keating: Well, no impact on policy holders, because the reserves, the capital are there to satisfy policy holder claims. That’s not the problems. The problem is we want to go out and buy bonds, we want to go out and get active in the marketplace as we traditionally are. Greasing this financial marketplace skid, making sure that we’re in a position to continue to buy trillions of dollars of bonds. And more capital means more commercial activity, more purchase activity, more lending activity. That’s good for the entire economy.
Radke: Frank Keating is president of the American Council of Life Insurers. Frank, thank you.
Keating: You’re welcome Bill, thank you.
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