MIs May Use TARP

Now that the Treasury is handing out TARP investment money to insurance companies (or is about to), speculation is beginning to center on the nation's seven mortgage insurers. According to a new research report from Sandler O'Neill, MIs are potential participants in the "capital investment program" under TARP where Treasury buys preferred stock in selected financial service firms, including insurers. But a spokesman for the Mortgage Insurance Companies of America said the trade group has not seen any of its members apply for a capital infusion. The Troubled Asset Relief Program initially involved Treasury buying problem loans and securities from financial services firms. Instead of buying problem mortgages Treasury has earmarked $250 billion of the $700 billion bailout money to buy preferred stock in banks and others, believing the firms will use the cash to lend, freeing up the so-called logjam in the commercial paper market. The Sandler report notes that with TARP MI firms would be on "new regulatory ground," adding that, "It is unclear how insurers can or will access TARP."