Hey! Let’s Bail Out the Insurance Industry, Too!

The House of Representatives is often called the Thinking Man’s Keystone Cops, and yesterday, we got to see why.  House Republicans are now floating the idea – in a desperate attempt to do anything, anything, anything but admit their entire financial premise of “Adam Smith is God” is mere folly – that instead of the U.S. government paying to bail out the financial sector, private insurance companies swoop in and insure the bad debts instead.

Did anyone ask the insurance industry what they thought of that?

To begin at the beginning, insurance companies are a bit like casinos, inasmuch as insurance is basically a bet that you won’t need as much money out of the insurance company as you put into it.  You pay $200 a month (no shit, it’s really that much, ask your employer) for health insurance and probably won’t use any of that for most of the years you’re paying into it, barring some doctor’s and dentist’s appointments and the occasional bottle of pills for something or other.  What you don’t spend is what they use to pay off the bills of sick people who actually need the money at the moment.

But if there are more people taking more money out of the system than are paying into it, the whole thing collapses.  And in fact, the insurance industry is so overwhelmed with expenses that they’re actually ditching people once they do get sick.  Because of course, like casinos, they’re not in the business of enriching your life.  You may have seen Sicko, yes?

So, with all that said, how many insurance companies out there are going to take on billions of dollars of debts already proven to be bad ones?  Probably as many as casinos who admit people with their own sets of loaded dice.  And if they are willing to take on the failed debts, what are we to provide them in exchange?  Because no company does anything for free – nor should they.

Finally, if it’s not already obvious enough, AIG just went into the shitter, itself.  AIG is the nation’s and the world’s largest insurer.  So, not only did the Great White Hope of the Republican Free Market Solution just go the way of sheep intestine condoms, but so did a huge investment trust of the insurance industry.

Because the insurance industry is really just another expression of the financial marketplace, dealing in risk just like stock brokers do.  In order to insure people, they need reliable “value stores,” as is the phrase I keep hearing whilst paying attention to this crisis.  In other words, the insurance industry has no money to pay so long as the financial industry has no capital to give them.