Potpourri

On Sunday, November 16, Treasury Secretary Paulson was interviewed on Fox TV. One of the questions asked was whether or not loans would be available to insurers if they needed them. He replied that the answer was “no,” because insurers were not federally regulated and therefore the Treasury had no way to evaluate the risk. (AIG did not receive help as an insurer but as a federally regulated holding company.) It was pointed out that several insurance companies had purchased a thrift organization, making them a “bank holding company” and would this make them eligible for help? My impression was that the Secretary was not enthusiastic about the idea.

Another idea that seems to be gaining traction in some circles is the notion that we need to do more by way of “wealth redistribution.” I don’t remember where I read the following but I believe it sheds a bit of light on the concept of distributing wealth.

A father was concerned about his teenage son’s fascination with the idea of spreading wealth around more. Father to the son, “You are making all A’s in school but many of your friends are only earning C’s. Why don’t you give them some of your A’s and then you will all be B students?” Son to the father, “No way.” So much for wealth distribution.

“‘Tis an ill wind that blows no good.” In my view there is at least a little good blowing today. The credit crunch is drying up funds available to purchase life settlements, good and bad ones. Some hedge funds have pulled out of the market altogether, according to the Wall Street Journal. Others have cut their purchases in half and the price for a settlement is falling. Some reduction in price is caused by new mortality studies that show a longer life expectancy than previously assumed. I am well aware that occasionally a life settlement serves a useful purpose, but I do not believe they serve the long-term best interests of either the public or the insurance business.

The November issue of Smithsonian magazine carried an interesting article about the election of President Lincoln. I quote from the article, “Despite the lingering uncertainty, Lincoln had done nothing public to advance his own cause. Prevailing political tradition called for silence from presidential candidates. In earlier elections nominees who had defied custom appeared desperate and invariably lost. Worried that Lincoln might be tempted to resume politicking, W.C. Bryant, editor of the pro-Republican New York Evening Post bluntly reminded him–make no speeches, write no letters as a candidate, enter into no pledges, make no promises, nor even give any of those kind words men are apt to interpret as promises. Lincoln obliged.”

My how times have changed!