I hate the entire bailout, but if it’s going to happen anyway, I think there is a good case for extending it to life insurance companies, as well as banks.
Why? Life insurance companies are supposed to be a safe place for consumers to invest their premiums for a long time, until they are returned as a death benefit. Unlike banks that are supposed to return money at short notice, and probably should limit their long term lending, insurance companies should invest in long term commitments like mortgages. Presumably, a lot of them did. Now they are stuck with colossal losses that they have no way to make up.
Short of allowing most life insurance companies to slowly fail over the next 1-10 years as this hole in their balance sheets shows up in full, it’s probably better to plug the gap now. It actually makes more sense than it does for banks.
