US Treasury Considers Extending Bailout to Insurance Firms

Could the feds spread the corporate-welfare wealth?

The US Treasury Department is studying how it could give relief to insurance companies under a $700 billion financial services rescue package, two sources familiar with the deliberations said on Friday.

The Troubled Asset Relief Program established by Congress earlier this month has been viewed primarily as a means to recapitalize banks and take bad assets off their books to help support creaking credit markets.

Last week, the Treasury tried to squash rumors the government was preparing to give bond and mortgage insurance companies a capital injection. But senior officials are considering how the Treasury might be able to aid state-regulated insurance companies, the sources said.

The Treasury so far has used capital powers to aid only federally regulated institutions. But the program, known as TARP, could be used to buy sour assets from other financial companies and help them scrub their balance sheets.

While there is no federal regulator for the insurance industry, which is regulated by states, some companies may qualify for aid because their parent holding companies operate under a federal charter. The Treasury Department has assigned a team to examine how it might deliver aid to the industry in a way that does not hit regulatory tripwires, the sources said.

via Reuters: US Treasury mulls insurer aid program-sources

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