Now we see that the Treasury is going to buy equity stakes in insurance companies with the bailout money.  To date, not one ‘toxic’ security has been purchased.  The treasury has been given a blank check – and instead of helping homeowners or actually buying distressed securities – they are buying stakes in all types of financial/banking companies.  Why?  I believe they are doing this to gain more control.  The question is – what happens when things begin to get even worse?

jg

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OCTOBER 24, 2008, 2:32 P.M. ET

Treasury Considers Stakes in Insurance Companies

By DEBORAH SOLOMON

WASHINGTON -- The Treasury Department is considering taking equity stakes in insurance companies, a sign of how the government's $700 billion program has become a potential piggybank for a range of troubled industries.

The availability of government cash is drawing requests from all corners, with insurance firms, automakers, state governments and transit agencies lobbying for a piece of Treasury's pie. While Treasury intended for the program to apply broadly, the growing requests could rapidly deplete the $700 billion, an amount that initially stunned many as being quite large.

Among those expected to benefit from Treasury's program are insurance firms. Most insurance companies are financially sound but have seen their long-term investments and stock prices hurt by the recent market turmoil.

Treasury wants insurance companies to participate in its program, dubbed TARP, and is considering taking equity stakes in certain firms, according to people familiar with the matter.

For now, however, only certain insurance firms would be eligible for a capital infusion. Under the terms of Treasury's program, insurers would have to have a financial institution holding company that was regulated at the federal level.

Insurers would also be able to sell its bad assets to the government under a separate element of the program.

Write to Deborah Solomon at deborah.solomon@wsj.com