WSJ reports that the Treasury has committed to give TARP funds to several Life Insurance companies:

“The life-insurance industry is an important piece of the U.S. financial system. Millions of Americans have entrusted their families’ financial safety to these companies, so keeping them on solid footing is crucial to maintaining confidence. If massive numbers of customers sought to redeem their policies, it could cause a cash crunch for some companies. And because insurers invest the premiums they receive from customers into bonds, real estate and other investments, they are major holders of securities. If they needed to sell off holdings to raise cash, it could cause markets to tumble.”

“Life insurers had for a time seemed to be somewhat immune from the credit crisis, since they tend to invest in relatively safe assets in order to match their liabilities. These companies got into trouble for two main reasons, both tied to the weak financial markets.

First, many of the roughly two dozen insurers that dominate the variable-annuity business made aggressive promises on these popular retirement-income products, guaranteeing minimum returns, no matter what happened to the stock market. With the market’s decline, the issuers are on the hook for big payouts, though most of the payments won’t come due for 10 or more years. Second, the insurers also have lost money on the investments in bonds and real estate that back their policies.”

Pre-market prices of many Life companies are up this morning.  It seems sad that stock prices react positively to news that more companies need federal bailouts.  The Insurance companies will now be subject to the same (uncertain) executive pay restrictions and other possible political whim as banks who take TARP money. The oligarchy’s control written about by Simon Johnson is expanding…

It’s perhaps not surprising, but notice that the new flexibility of the Life companies to value their asset prices according to “mark to fantasy” is not forestalling the need for real cash.