Bailout

One of the problems with working a day job is that it interferes with blogging.  Sadly, for bloggers like me whose interests are too unfocused and whose writing style is rather amateurish, the day job pays better. 

While I was away, I flagged several articles I could point at, or topics I could write about.  Sadly, it looks like I’m not going to have to time to do much detailed catch-up (especially with another many-miles-in-little-time trip coming next week).

But I can do a quick chop-suey post.

• While transiting ATL yesterday, a coworker and I were accosted by Delta folks asking, “are you a SkyMiles member?”   I suspect they were trying to get folks to sign up with Delta’s affinity credit card.  I waved them off with the response “not until that part of the merger goes through” (I use Northwest’s program to aggregate my DL/NW/CO miles).   They didn’t seem entirely happy with that answer;  whether that was because they were getting few takers for the credit card offer, or disgruntlement with the Delta/Northwest merger (which apparently passed the last major regulatory hurdle while I was in the air), I cannot say.   I guess I can ask when I pass through ATL next week.
   
• I had thought Memphis’ days as a hub were numbered, with the merger of Delta and Northwest.  However, a Commercial Appeal article paints a more positive picture, due to capacity constraints at ATL.
   
• There is one advantage to Congress’ approval ratings being so low.  When spending time with a couple of coworkers whose political views seem to be frequently-in-opposition to my own, it’s nice to find common ground on the irrelevancy of the Presidential race, given the lack of turnover in Congress.
   
• IJ has a blurb on some good news (from an insurer’s perspective, at least) from the world of asbestos litigation.
   
• The Courant expects that same-gender marriages will begin in Connecticut on or about November 10.
   
• Travelers and the AIA are becoming vocal about how many mainstream property/casualty insurers are not in need of bailouts, and therefore we shouldn’t be bundled in with the woes of those carriers (life, surety, and some leveraged specialty/reinsurance) experiencing indigestion with the state of their investment portfolios.  However, word of CNA’s cash infusion from Loews illustrates the caveats that ought to come with such a pronouncement. (CNA, however, does deserve some respect for masochistically joining the no-bailout bandwagon.)
   
• I’ve seen rumblings that some folks believe the crash of ’08 marks the end of the soft market, and the beginning of a new hard market for commercial insurance.   For example, a Wall Street Journal article (subscriber link) quotes Ace’s chairman’s observations that the industry isn’t as overcapitalized as it was less than a year ago.
   
• Speaking of the end of overcapitalization, the Palm Beach Post has an article mentioning how several Florida-only subsidiaries may be up for ratings downgrades due to the current turmoil.
   
• The Moderate Voice has an interesting post up about the varying views on the oldest extracurricular activity for teenagers in red versus blue states.  
   
• CT News Junkie passed along word of a UConn poll suggesting a plurality of support in favor of Connecticut’s constitutional convention question (50% yes; 39% no; 11% undecided) .  A telling comment in the story: “The Constitutional Convention question appears to be a referendum on the performance of the General Assembly.  Connecticut residents unhappy with legislators in Hartford support holding a convention to amend the constitution, whereas those happy with the General Assembly oppose holding one.”  That’s in spite of the pro-ConCon campaign’s push to make a ConCon about ballot initiatives.
   
  That comment also furthers my amazement that incumbents by-and-large will likely be reelected countrywide, in spite of an apparent across-the-board dissatisfaction with most legislative bodies.

Before the market went “splat” today, it seems that there was still quite a bit of grumbling floating around about AIG’s boondoggle for agents which took place after their bailout.  Quoting Business Insurance:

Sen. Baucus asked Mr. Bernanke to explain what controls over AIG management the Fed is able to exert and requested that answers be delivered to the Senate Finance Committee by Oct. 23.

The issue of the AIG retreat received a lively airing on Tuesday from lawmakers who blistered former top executives of the insurer at a Capitol Hill hearing.

"They were getting facials, manicures, and massages, while the American people were footing the bill," said Rep. Elijah Cummings, a Maryland Democrat on the House Oversight and Government Reform Committee.

Robert Willumstad, chief executive of AIG from June until he was replaced last month, told the oversight committee he was not aware of the retreat that included $200,000 in hotel rooms and $23,000 for spa services.

Now, when I help fill out those ever-lovin’ forms required by some states for even the most trivial insurance rate tweaks, it’s not uncommon for me to have to fill in answers to questions on “disallowed” expenses, like lobbying or excessive executive pay.

I can’t wait to see states start demanding accounting for boondoggles such as the one AIG was caught sponsoring.

To be honest, such an event isn’t necessarily “wrong”.  At the very least, such posh excursions are not uncommon in the industry, especially when it comes to rewarding valued agents and associates.  After all, they are rewards for folks who are supposed to be driving the success of an organization, and rewards are generally supposed to be nice.

However, a few of us are also familiar with rules like the “New York Times test”.  That’s an informal rule which can influence decision-making: if you do something, and it lands on the front page of the New York Times, how will it look and are you OK with that?  If you aren’t, consider revising your plans.

Apparently, having a boondoggle after the federal government has become a major investor in your parent company does not look good on the front page of the Times.  Plans probably should have been adjusted accordingly.

My lovely wife has informed me that “Über” is like so yesterday.

She insists that the bailout henceforth be called the “Pigs in a Blanket Bailout”, due to the amount of pork added to buy enough support for passage.

KagroX at Daily Kos has been posting a summary of the Senate debate on their version of the bailout bill.

A few of the items found tucked into the bill include:

Page 279 — Rum excise tax to Puerto Rico and the Virgin Islands

Page 280 — Mine rescue / mine safety

Page 290 — Motorsports racing track facility

Page 290 — Hurricane Katrina and Gulf opportunity zone

Page 295 — Wool modifications

Page 296 — Permanent authority for undercover operations

Page 297 — Child tax credit

Page 300 — Children and wooden arrows

If the “Page 290” item is what I think it is, then doesn’t that put McCain into a bit of a quandary?  After all, he has (rightfully!) taken pride in his anti-earmark stance, and he has called for the bailout to be launched…..

Seen at Donklephant:

I think we can continue to admire and support the power of free market economics while also recognizing the need for a certain level of government regulation and financial backing. A bailout is needed at the moment. After that, we can work on reforming the rat’s nest of regulations that currently exist. The more we recognize that our economy is and always will be a public-private affair, the more we can address our problems rationally. This is not a moment for ideological grandstanding. Such inanity just adds more obstacles in our pursuit for a solution.

Amen!

There is one other observation I can add to such sentiment: Many of the critics of the bailout seem to take issue with it not being fair that some people or entities seem to benefit at the expense of others.  I agree….but the sad reality is that life isn’t fair.   Folks who require fairness in their lives are doomed to disappointment.

It’s not fair that my family will likely be adversely impacted (indirectly, if not directly) by the bad decisions made by others.  However, I personally would prefer that any such pain be alleviated…or at least cushioned…if possible, rather than face an uncontrolled crash in the economy aggravated by market hysteria.

Yea!  We made it through the weekend without any major financial failures!

Instead, it sounds like our fearless leaders and pundits (professional and armchair alike) are discussing Secretary Paulson’s request for $700 billion to buy toxic assets out of financial institutions’ portfolios.

Reaction seems to be focused in two realms – the “no bailouts” camp and the “what other goodies can we add to the fun".

I actually subscribe to neither position.  I’m kind of sad that mass stupidity has lead to this failure of the somewhat-free market, and I accept that “something big” would go a long way to at least encouraging stability in the market, which would (if nothing else) alleviate irrational panic behavior.

I’m also interested in hearing if $700 billion is the cost, or just the potential expenditure from which there might be recoveries, since those toxic assets most likely aren’t worthless.

I am disappointed that more folks aren’t also considering how this magnitude of deal impacts the toxic level of national debt we already carry.  I don’t mean to support the “no bailout” school of thought…but I would feel more comfortable with the feds intervening this way if it were accompanied by some good public debate on the national pastime of spending more money than we have.

But that would be sensible.  And “sensible” seems to be woefully in absence these days.