Will CDS, MBS, CDO Bring Down Financial Institutions (Insurance Companies)?

September 18, 2008
Updated March 17, 2010

Is it the 'credit default swaps' (CDS), 'mortgage backed securities' (MBS) or 'collateralized debt obligations' (CDO) negative adverse effects alone that is doing this and/or, what part, if any, do the following questions and factors, as widely reported by the media, play in this debacle as we work through the present crisis in the economy: is it the enormous anger and bitterness that the diminishing income middle-class American People rightfully have toward the extremely short-sighted risks taken at their financial expense and loss of 'their' hard-earned moneys by the top managements of these institutions for their own extreme and obscene personal financial gains and excesses ... and now these same American People who have lost their moneys and previous good credit ratings should bail them out? (2) is it that so many U.S. insurance companies and financial institutions and/or their top management have repeatedly been exposed in recent years for their widespread fraudulent and dishonest dealings that the overwhelming majority of Americans have learned not to trust them? (3) is it the extreme distrust between these institutions that has credit markets frozen and lack of or non-existence of loan availability to borrowing between these repeatedly proven less than scrupulous institutions can't be trusted to pay back loans? (4) is it housing prices coming down to earth and so many Americans underwater and/or their credit worthiness tainted, and/or the growing majority of middle-class Americans exposed to their own diminishing incomes over the past 5+ years, how few of the shrinking remaining numbers left will be able and/or want to borrow from such lenders once the chaos calms and the economy goes through its necessary lengthy and painful untenable recuperative stages before it reaches and returns to a smaller, slower but healthier, stable growth, and possibly more honest state?

Thanks to the genuine and justified bitterness and anger overwhelmingly displayed by the Public to these events, and the Public's tiresome nature to the administration's repeated use of 'fear' in the recent past's events (such as the U.S. Iraq War, etc.) and which if not dishonest were at very least as looked back upon as being less than genuine, 'fear' as a motivator and as expressed by the administration 'is out', and what 'is in' at least for now are calls and demands by the Public for much greater transparency in our country's financial institutions and Government ... and is reaching the point of discontent amongst the People where otherwise political candidates know there is a growing popularity and likelihood that they will be voted out of office. Accordingly, as we work through our financial crises and have a chance to observe repeated present attempts at temporary unsuccessful Government financial fixes and moneys being thrown at the perceived sources of problems which of course all Wall-streeters' love, there is a contrary and overwhelming consensus of our country's and the world's 'independent' economic experts that agree that the U.S. Government's (and the other large financially based G-7 and G-20 Government nations each with their individual policies, limitations and domestic problems of their own) temporary financial fix-after-fix band-aid approach and attempts to repairing these broken companies and entities will not work, will only serve to further enrich the administration's 'Treasury Secretary's friends', will only perpetuate the pain and put-off what is inevitable. The growing overwhelming consensus by (non-Wall Street) independent economic experts, agree that the only fix and solution is to let these broken institutions fail and reorganize through bankruptcy or conservatorship.

In the meantime in such financially difficult times for so many insurance companies, FBIC calls on all states' Insurance Departments regulators for closer 'direct' scrutiny and oversight, and to immediately audit insurance companies cash reserves to make sure that they are maintaining required adequate daily cash levels of reserves and that they adhere to their requirements under the law. FBIC also warns regulators not to trust what insurance companies may claim, indicate, attest to and/or certify to your insurance regulatory state agency ... and to ensure on behalf of the citizens of your state that there's no financial misrepresentation or fraudulent goings on and that the Public's moneys entrusted to insurance companies are appropriately protected by law and safely held in reserve. (After all, may we remind all the states' Departments of Insurance regulators that we don't want more situations occurring such as the recent AIG and General Reinsurance substantial fraudulent activity exposed, for just one example, as well as the many other insurance companies frauds which were also exposed as chronicled by FBIC on this website here which took place in 2005-2006 along with the multitude of so many other widespread related insurance frauds which took place right under your 'DOI' noses that were prosecuted by a few select states Attorneys General  i.e. NY/Spitzer, CT/Blumenthal and many more exposed by FBIC and the media, but no frauds of which were proven to ever be exposed by a state DOI who if anything were found to be cooperative with the fraudulent insurers and enabled such frauds from occurring in the first place and in some cases where the alleged moneys represented by insurance companies that were supposedly being held in reserve on paper but in reality weren't there.)

FBIC reports the following insurance companies to have such negative exposures to credit default swaps, mortgage derivatives and other instruments in their investment portfolios creating adverse financial effects. They include: AIG (AIG), Hartford Financial Services aka The Hartford Insurance (HIG), Metlife (MET), XL Capital (XL), Principal Financial Group (PFG), Allstate (ALL), Progressive (PGR),  PartnerRe (PRE), Ameriprise Financial Inc. (AMP), Prudential Financial Inc. (PRU), Genworth Financial Inc. (GNW), Lincoln National Corp. (LNC). (Read up-to-date media articles from FBIC and the mainstream media right here on this website from FBIC for more information on some of the insurance companies with related significant negative exposures).

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