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No TARP for You!!

By Larry Doyle on April 15, 2009 at 7:35 AM in Insurance Policies & Industry, TARP

No soup for you!

No TARP for you!

Who can ever forget the Seinfeld episode featuring the Soup Nazi? Well, in that same vein, the insurance company Genworth Financial was just summarily thrown out of the Treasury “line” to receive TARP funds. The WSJ reports, Genworth Financial Shares Slump on TARP Ineligibility:

Shares of Genworth Financial Inc. fell as much as 31% Monday as investors responded to the insurer’s late-Thursday announcement that it is ineligible to participate in the Treasury’s Capital Purchase Plan because it missed a deadline that Treasury won’t extend.

The mere fact that Genworth, Hartford Financial, Protective Life, or any other insurer are requesting government funds is another version of the “putting perfume on a pig” play we saw with the FASB relaxation of the mark-to-market. Why is that?

The TARP (Troubled Asset Recovery Program) was designed by Congress for banks needing increased capital. If investment banks can become bank holding companies, why not insurance companies as well? Perhaps, the next thing you know, we’ll have plumbers designating themselves as banks. How about construction companies? Maybe a bakery or two? Anybody for a newly defined U.S. Financial Blogging Bank? Where do I sign? We could all use some “soup.”

Effectively, Genworth was late in returning their homework. The WSJ article highlights:

Late Thursday, Genworth said it was informed by Treasury that the deadline it set for approval by the Office of Thrift Supervision to become a bank-holding company wouldn’t be extended. As a result of the announcement, Genworth said it won’t be able to complete its intended acquisition of Minnesota-based Interbank. The two companies had entered an agreement last November.

Wow! Genworth had 5 full months to complete necessary approvals, akin to a homework assignment, and they did not get it done. With a performance like that, Genworth truly does not deserve to get TARP money. In all honesty, insurance commissioners around the country may want to check what else Genworth has not completed. When you’re on life support and you don’t follow the directions to apply for medication, how badly do you really want to live?

While insurance executives may put out the “All Is Well” sign, the WSJ highlights a widely known fact:

Life insurers have struggled with losses related to their guarantees on variable annuities as well as their portfolios that are largely exposed to the financial sector and equities in general. Their troubles led to a string of rating-agency downgrades that, in a vicious cycle, made it more difficult for some insurers to raise funds.

TARP “likely will temporarily boost investor confidence, but TARP funds alone cannot eliminate the capital/liquidity pressures caused by weak credit, equity market and economic conditions.”

As for Genworth . . . No Tarp for You!!

LD

  • Peggy Sue

    I guess this doesn’t fall into the “glimmer of hope” we’re suppose to be responding to, Larry. I keep reading these reports, yours and others, and then listen to the “happy talk” from DC and wonder if Treasury doesn’t think people will notice the disconnect.

    But many people, just ordinary folks, are beginning to wake up and are becoming very angry. It’s bad enough that we’ve lost our personal savings, our retirement funds and many pensions hang on a thread. Jobs are tenuous at best, salaries frozen and the mortgage meltdown is still spinning. And we’re suppose to stroke the fat cats, who brought the market to its knees? Or accept narrative accounting to make the books look better than they are?

    As Judge Judy always says, “when it doesn’t make sense, it isn’t true.” Maybe Geithner and the Washington financial wizards need to tune in to a few episodes.

    It’s almost laughable. Except it’s not.

    Thanks for the update!

  • huh

    Wow! Genworth had 5 full months to complete necessary approvals, akin to a homework assignment, and they did not get it done. With a performance like that, Genworth truly does not deserve to get TARP money.
    –

    Might be more to this story than meets the eye. This Co. had lawyers and they knew when the due date was. Me thinks that they might not have wanted the strings that are attached to TARP. Letting the time line slip by was thier safe, non-confrontational way to handle it. Look at what happened to GM’s board, and wonder no longer. There are many firms that want to give back the money but Obama won’t allow it. What he wants is control, he does not care about your tax money.

  • huh

    follow up

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aQfH3nZz9azc&refer=worldwide

    Dimon said the bank, which bought about $34 billion in mortgage-backed and asset-backed securities in the quarter, doesn’t expect to participate as either a buyer or seller in the Treasury’s Public-Private Investment Program, known as PPIP. “We learned our lesson” about borrowing from the government, said Dimon, who expects PPIP to benefit the financial system as a whole.