Friday, November 14, 2008

This Should Make You Very Mad

NEW YORK (Reuters) - Hartford Financial Services Group Inc, a property and casualty insurer beset by worries about capital levels, said on Friday it agreed to buy a small savings and loan, making it eligible to raise up to $3.4 billion from the U.S. government's bank bailout plan. An infusion may alleviate investor concerns about capital at Hartford, which suffered a $2.63 billion third-quarter loss, and last month raised $2.5 billion from German insurer Allianz SE. Shares of Hartford soared 20.9 percent on Friday, closing up $2.19 at $12.65 on the New York Stock Exchange.
Hartford said it agreed to buy Sanford, Florida-based Federal Trust Corp, which operates the 11-branch thrift Federal Trust Bank, for $10 million. The insurer said it plans to recapitalize Federal Trust, and has applied to the federal Office of Thrift Supervision to become a savings and loan holding company.
Hartford said the developments should allow it to sell $1.1 billion to $3.4 billion of preferred shares to the government under the Treasury Department's $700 billion Troubled Asset Relief Program.

"We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability," Chief Executive Ramani Ayer said in a statement.
To simplify what's happening here: Hartford Insurance, an insurance company that made a lot of bad bets, needs money. They aren't currently eligible for funds under the government's program, so they are spending $10 Million to buy a little savings and loan bank in Florida. They will then take advantage of the system, reclassify themselves as a Savings and Loan, and be eligible for up to THREE BILLION DOLLARS from the treasury's fund. Spend $10MM, file some papers, get $3B in government handouts.
Oh - by the way - Hartford isn't the only company that's trying this scam. Aegon, Genworth and Lincoln Financial also did the same thing, and last week American Express morphed into a "bank holding company," as did GE Capital and CIT group - all just to try to get their hands on the money the government is parcelling out.
This should make every American taxpayer FIGHTING mad.

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