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No TARP For You!!

Posted by Larry Doyle on April 13, 2009 1:49 PM |

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!!


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