Bailouts

  • 1920s/1930s - Great Depression
  • 1980s - Federal Reserve
  • 1990s Executive Life
  • Federal Reserve Report on Economy
  • 03:38:22
    		  

    SEN. RIEGLE

    And the banks got into big trouble. Not just the ones under your supervision, but the ones under the supervision of other regulators. And last year, we had to pass legislation to provide a $70 billion tax payer loan because the bank insurance fund was broke. Not the S & L's, now, but the commercial bank insurance fund was broke. And at a deficit, the GAO tell us, at the end of last year.
  • 2008 - FCIC
    • 2009 CSPAN - AIG Collapse
    • Caroline - 17-20bn to AIG Life Insurance - Liddy
  • 2016 - JIR / NAIC - A Post-Mortem of the Life Insurance Industry's Bid for Capital During the Financial Crisis, by Michelle L. Barnes, James Bohn, Cynthia L. Martin, Federal Reserve Bank of Boston - 41p
  • The life insurance industry takes great pride in its survival of the depression, although it seems to me that it was bailed out by government intervention.
    • I wonder if the time may come again, say if the prime rate goes to 38%, that the life insurance industry will need to be bailed out in some fashion.
    • I do not know what that fashion might be, but that is why I am curious about the nature of the discussions of April 1980.

--  Joseph Belth, Academic

1981 - SOA - The Life Insurance Business --- The View of Consumerists, Society of Actuaries - 18p

Senator BRYAN.

  • You think so. And can you tell us how widespread that is likely to be?
    • Because although some have tried to say, "Well, you know, the Congress is just trying to get itself involved in another area.” 
  • When you see this kind of a report and other comments which are made in financial journals, not by those who hold public office, and you look back over the decade and I must say I consider myself very lucky...
    • I was not here in Washing ton in the 1980's.
    • I was very fortunate from my perspective.
  • I must say that there is kind of this blurred impression that in the 1980's, folks from the savings and loan industry were saying, "Hey, there is some isolated problems, no need to get involved."
  • We all know how that story came out.

A year ago, I happened to serve on the Banking Committee as well.

  • We were told, look, that that fund is fine, that we are not going to need any Federal bailout.
  • Today I attended a hearing in which representatives of the industry, the independent banking association, the ABA , the major trade associations, if you were lining up, you know, a $10 billion plus loan to in effect recapitalize the system.
  • That ultimately, as you well know, Mr. Sutton <ACLI / Pacific Life>, means you and I, the taxpayers, all of us collectively.

And so when we hear these assurances it is not that we impugn your integrity, but I must say that there is a hope that you are right- because that is the last thing the country needs or this Congress needs to deal with.

But give us a little bit more of your sense.

  • How widespread is the problem out there?

And what levels of failure are we likely to see under the reasonable parameters, as opposed to the most Draconian, you know, a complete economic collapse?

[PDF-369p-GooglePlay, <No Video-227/0507 and 0523> -  0509-VIDEO-CSPAN]

  • Joseph BELTH: Before you sit down, John, let me ask you a question.
    • Rumor has it that there were some extensive discussions between highly placed life insurance officials and officials of the Federal Reserve in April, 1980.
    • Would you care to discuss exactly what the nature of those conversations was?
  • John BOOTH (ACLI): I was not present.
    • There were some discussions; as you know, in the Spring there was a policy loan crunch.
    • There have been discussions held periodically as far back as 15 to 20 years.
  • MR. BELTH: I raise the question whether the disintermediatlon problem could conceivably become so serious as to threaten the viability of the life insurance industry and force some kind of unilateral governmental action in order to save, or literally bail out, the industry.
    • One incident that I recall which somehow has been blacked out of most textbooks was when the NAIC (it was then the NCIC) allowed life insurance companies to change their valuation rules for just one year.
    • Was it 1932?

1981 - SOA - The Life Insurance Business --- The View of Consumerists, Society of Actuaries - 18p

<BonkNote:  Referencing ->???

  • Further Resolved, That inasmuch as a number of worthy industrial and commercial corporations are in emergency receivership and a number of corporate bonds are in default as to interest and/or principal by reason of lack of liquidity rather than by reason of lack of underlying value, stocks of corporations in receivership and bonds in default should be valued on the 1931 Convention basis less 30 per cent of the difference between such Convention value and the exchange quotation as of December 1, 1932, unless the value underlying such securities has been heavily depleted or has disappeared to such an extent that a lower value is required by reason of such special circumstances. (p8)
  • The Committee on Valuation of Securities

1933-1, NAIC Proceedings, volume only, NAIC/ NCIC

We must get rid of "too big to fail."

  • It must be declared today that there will not be government backup other than some sort of minimum level.
  • You could use  $100,000 on deposits if you want to.
  • Insurance companies have had their own fund.
  • That $100,000 should absolutely be paid solely by the banking industry.
  • There shouldn't be a nickel to the taxpayer, but it has to be clear that there's a limit and anyone who has more than $100,000 to put in a bank can gauge whether that's an appropriate risk reward to take, just as they would with mutual funds for example.
  • We have to address this, and we have to make it clear because there is, as we've seen in other countries in Asia, not enough money around to support irrational risk-taking, and there's lots of irrational risk-taking going on out there.

-- Richard M. Kovacevich, President and CEO at Wells Fargo and Company

1999 - SOA - CEO Perspective: The Future of Financial Services, Society of Actuaries - 19p