Uncle Sam Owns Your Insurance Company
Bush Administration forces companies to surrender stock in exchange for bailout loans
Hasn’t anyone noticed that the federal government is taking over industries? Once more the Bush administration is taking advantage of pubic panic to do the unthinkable.
- Treasury Secretary Henry Fowler
This isn’t the first time the administration used public panic to cover questionable decisions. In the wake of the 9/11 terror attack, Bush used the resulting panic to start an ugly war that has cost thousands of American lives. He also created the office of Homeland Security which has compromised some of America’s most coveted personal freedoms; all under the cover of public dismay.
Now, as people lose their homes over bad mortgages, the Bush administration once more under the cover of this new financial panic is taking over companies. That’s right, the Bush administration is exchanging ownership of companies for badly needed loans.
The first victim of this government takeover is AIG, the world’s largest insurer. In exchange for an $80 Billion loan package the company had to give the government 80% of its stock. Who got hurt? People with 40iK’s, retirement funds, schools and other institutions as well as individual stockholders. AIG traded at $70/share before it got in trouble. On the brink of bankruptcy the stock fell to $2 a share. After the Federal bailout, the stock hovers at $2.00, never to go much higher. Why? The math is simple. Before the crash, AIG traded at $70. When the government forced AIG to give up an 80% interest, the stock instantly lost 80% of its value. So now your $70 share has an adjusted value of $14. The current price of $2 is a lot lower, but unless the market goes completely insane, it is unlikely that AIG will ever go over $14 a share.
Congress passed a $700 Billion bailout program. The intention was to buy back mortgage-based securities; the so-called “poison” securites, thereby defrosting the frozen financial markets. The Bush team doesn’t want to do that anymore. They want to “give” the money to banks in exchange for stock. That’s right, our conservative Republican administration, you know, the guys who tell us we need less government, is taking over banks.
That’s far from the end of this story. Treasury secretary Fowler is proposing that some of the $700 Billion be used to help out failing GM in exchange for…guess what? That’s right! Stock! Do we really want our government controlling the insurance and auto industries? Isn’t this exactly what the Soviets did a century ago? We know how well that worked out.
What’s most surprising is the lack of public outcry. The stock market losing nearly half its value, the business failures, home forclosures, layoffs, and gloomy forecasts have once more panicked the American people and made them willing to follow blindly the questionable leaderhip of the worst president in American history. By the way, every time the government takes over a company, the millions of people who have stock, lose virtually all of their investment. AIG traded at nearly $70 a share. After the federal bailout, the stock hovers at $2. Who lost the money? Mutual funds, retirement funds, millions of ordinary Americans who counted on that company’s continuing success to fund college educations, retirement, new homes, and financial security.
Once more we have been distracted. While we aren’t looking, the government is taking over private enterprise. What’s worst, our new president Obama has been silent on this subject. Could he be panicked too? Is this what we want? It may be too late to stop, but at least we should recognize the high price we are paying for the current federal bailout program.