Thursday, April 09, 2009

Small investors might invest in TARP; SEC reconsiders short selling restrictions

Graham Bowley and Michael J. de la Merced report today (Thursday, April 9) in The New York Times that the Obama administration is considering a plan where the government offers “TARP” bonds to small investors in order to let them “profit” from the bailouts. The story is here and is titled “U.S. Plan May Enlist Small Investors in Bank Bailout”. The “patriotic” concept follows that of Liberty Bonds or War Bonds. Some big mutual funds like BlackRock are said to support the idea and stand to gain.

During the New York City financial crisis in 1975, the City offered “Big Mac” bonds.

Also, the SEC has requested public comment “on whether short sale price restrictions or circuit breaker restrictions should be imposed” in a press release (2009-76) dated April 8, 2009, link here.

The Treasury Department is also considering using bailout money for a number of life insurers, although apparently they would have to own “banks” receiving TARP to qualify. There is a concern that insurers will face ratings downgrades and will cause disruptions in the bond markets, particularly important to retirees. A number of major, household brand life insurers were listed. The April 8, 2009 New York Times story by Mary Walsh is “Questions over Bailout for Insurers,” here.

Anecdotally, I’m hearing that new life insurance agents are having an extremely hard time making it these days, that 90% wash out in three years or less. It’s hard to bother people to become leads.

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