Yet Another Bailout

Will it ever end? Life insurance companies will join banks and the auto industry as the third group to receive a bailout, the Wall Street Journal reports. Insurers that own federally chartered banks will be eligible for a piece of the Troubled Asset Relief program's remaining $130 billion, although it's unclear how much the industry will receive as a whole. The investment portions of life insurance policies are what's caused the problems: many insurers made aggressive promises to consumers who purchased variable-annuities and guaranteed minimum returns and many insurers backed their policies with portfolios that included residential mortgage and commercial real estate assets. If large numbers of Americans redeemed their policies, life insurance companies would face a cash crunch and could cause markets to tumble by selling off holdings to cover their losses.