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Unintended Consequences

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Just as it took President Richard Nixon to go to China and President Bill Clinton to reform welfare, so it has taken George W. Bush, the most rigidly free-market president in memory, to turn the United States into a socialist country–at least temporarily.

I don’t know how else you define an economic system where the federal government has effectively nationalized some of the largest banks and other financial institutions–at least temporarily.

This is quite in keeping with this administration’s deep-mining of unintended consequences, however. Nixon, at least, planned to go to China and made good on it. Clinton, confounding all the naysayers, took the welfare reform bull by the horns.

However, let’s hope that the meltdown of the U.S. economic system was not something Bush actually planned for. I think he simply allowed too much laissez in the laissez-faire attitude of the last 8 years and this is the consequence.

The week of Oct. 6 was nothing less than terrifying and that came on top of a string of events that even a couple of months ago would have been unthinkable. So many brand names, so many icons, now nothing but detritus or no longer their own masters.

One day the historians will look back on this time and identify what went wrong over a period of years and what were the pressure points that accelerated a burst mortgage bubble into a global economic cataclysm.

Right now the instant historians are at work and many of them have identified the decision by the government to let Lehman Brothers fail as the event that seemed to propel the system headlong into the current chaos. Whereas others had been judged too big to fail, Lehman was judged too small and not significant enough to save.

There seems to have been a fundamental misapprehension of what the failure of such an institution, one whose business was so intertwined with others around the globe, would set off.

For a while, at least, it seemed like the life insurance business would escape the flames, but that is proving not to be the case. It simply took a while for the flames to catch up. Stocks of major life insurers have taken a pounding in the last couple of weeks and companies have had to start raising additional capital.

The industry is still undoubtedly strong, although the rating agencies have lowered their outlook for the business to negative.

This would have been a perfect time for someone to act as the face of the life insurance business, someone who could tout its essential strengths.

And who better than Frank Keating, CEO of the American Council of Life Insurers, the trade group representing the largest life companies?

Unfortunately, Mr. Keating seems to have been preoccupied with other pursuits. The Associated Press and a blog on the Washington Post website both reported that Mr. Keating was out beating the hustings for Sen. John McCain and attacking Sen. Barack Obama in a particularly unseemly way. According to the reports, Mr. Keating, a former governor of Oklahoma, said on Dennis Miller’s radio show on Oct. 9 that Sen. Obama should admit he was “a guy of the street” who “used cocaine.”

It’s no secret that Sen. Obama has admitted to using cocaine when he was a teenager–it’s right there in his memoir. But for Mr. Keating to bring it up as if this is a long hidden secret and to refer to the senator with the thinly veiled racial reference, “a guy of the street,” seems to me to go way beyond what the head of the major life company group should be doing.

Like it or not, the life insurance business is Mr. Keating’s back yard now, and that’s where he should be tending to his business. Goodness knows, there’s enough to do.


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