Feds Looking to Include Insurers in the Pigs-In-a-Blanket Bailout

(For an explanation on the term “Pigs-In-a-Blanket Bailout”, see this post.)

Seen in the Wall Street Journal (subscriber link):

The Treasury Department is considering buying equity stakes in insurance companies, a sign of how the government’s $700 billion rescue program could turn into a piggy bank for a range of beleaguered industries.[…]

MetLife Inc. and Prudential Financial Inc., two of the nation’s largest publicly traded life insurers, and New York Life Insurance Co., one of the highest rated insurers in the U.S., are interested in exploring a sale of equity stakes to the government, according to people familiar with the matter.[…]

Under the terms of Treasury’s program, eligible insurers must be operated by either a financial institution holding company or a savings and loan holding company. The holding companies must also be regulated by a federal agency.[…]

The big ratings agencies have the life-insurance sector on "negative" outlook, anticipating a round of one- to two-notch downgrades, as companies brace for additional investment losses, weaker earnings and reduced financial flexibility. Many life-insurance products are pitched to consumers on the basis of an insurer’s financial strength, so moving to a lower rating can have an impact on sales.

Note the requirement of federal regulation there.  We have been wondering if the debate on state versus federal insurance regulation was going to take a turn towards the interesting.