The Insurance Package in the Bailout Plan
How can anyone justify this newly added portion of the plan as protecting us, the taxpayer? I love to read books on a variety of history topics, and the Great Depression is a fascinating era, so I feel that the bailout plan is absolutely needed (which appears not to be the general consensus with the public though). Is the plan perfect? No. However, if we set clear guidelines of how to proceed, and adhere to those policies, it should be effective. Now certain lawmakers insisted that selling insurance to cover bad debt has to be part of the plan, or otherwise they will not vote on it.
Let’s think this through. The principle of how insurance companies make money is easy enough for all of us to grasp. They sell a policy to cover something we are concerned about (health, home, or vehicle) when there is nothing wrong with it. The insurance is to cover the possibility of a future problem. Insurance companies sell this policy to many people, so when one person has a problem, they can cover the costs, and still turn a profit.
These lawmakers want to sell this policy to cover bad debt to firms who we know are carrying bad debt. There are no fully healthy firms out there (and if there are, will they buy this policy to help cover the expenses of the troubled firms?). These financial companies now have the policy, so once the bad debt surfaces (which is already happening), they can use the policy to cover themselves. We will not be selling this policy to healthy firms, and we will not be selling to many firms; the two factors which makes insurance companies profitable. We are being set up for the fall, so large corporations, who made the mess, will not have to suffer.
Where is the benefit to the taxpayer then? No profit will come from such a plan. This industry is already laying off workers, which they will likely not hire back. Other industries are laying off or loosing workers which will not come back soon either. I cannot see how bailing out these firms in this manner will improve the economy effectively, or provide a return on investment for the us. Firms which benefit from the bailout must be made accountable for their actions in some way. A misguided insurance policy will not bring them to account for a debacle of their own creation.
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