Insurers Reject TARP To Avoid Getting The Scarlet "T"

So the insurance companies made a big deal about getting TARP protection, doing through all kinds of hoops to get the cash, and now that it’s available, they don’t want it.

Allstate is the latest to decline the funds, citing its “strong capital and liquidity positions.”

Yes, everyone has strong capital and liquidity these days. But what gives?

It looks like the original TARP nightmare that Hank Paulson had, that TARP acceptance would brand institutions with a scarlet T is coming true. Now that Goldman Sachs (GS), JPMorgan (JPM) and all these small banks are rejecting TARP, calling it “painful” or whatnot, any insurance company that accepts is saying either: Yes, we want a lot of pain and government intervention in our business (which is ludicrous) or they’re saying that they’re seriously deficient on capital, and are willing to put up with all kinds of intervention, which is scary.

So they’re all rejecting TARP now, cause there’s no good way to spin accepting it. This could be a risky game (though realistically they can change their mind). If the Treasury hadn’t cragged their feet so long and approved insurers back in March, it would’ve been fine. But now that we’re in the post-TARP era, it’s all over.

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