State Guarantee Funds - mention them or not?

Jun 15, 2019

  1. Allen Trent
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    never say never. it happened for several carriers when they took TARP money to help offset their bad business practices about 10 years ago.
     
  2. VolAgent
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    People can call it whatever they want, if carrier X has to give money to the state to pay for carrier A's mistakes, then it is the state spending other people's money. And at some point, the state has to decide how much good money they are going to throw after bad.
     
  3. somarco
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    somarco GA Medicare Expert

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    Unless things have changed, most (if not all) insurance dept's are funded by premium taxes. Very little of those tax dollars flow to the DOI. Most spill over to the general fund.

    In many states premium taxes exceed any other tax revenue source.

    Policyowners, who may or may not be "direct" tax payers, fund the premium taxes.
     
    somarco, Jun 19, 2019
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  4. somarco
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    somarco GA Medicare Expert

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    TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6% and perhaps a loss when adjusted for inflation.[2][3]
    Troubled Asset Relief Program - Wikipedia

    I am pretty sure TARP was used to bail out banks who made risky mortgage loans initiated during the Clinton administration. Willie thought everyone should have a home and pushed the banks to relax their lending standards as part of the CRA (Community Reinvestment Act). Banks would red-line certain areas where they would not make loans . . . and with good reason. Clinton felt that practice was discriminating against poor people

    CRA originated in 1977 and was overhauled several times including 1995.

    Robert Rubin, the Assistant to the President for Economic Policy, under President Clinton, explained that this was in line with President Clinton's strategy to "deal with the problems of the inner city and distressed rural communities". Discussing the reasons for the Clinton administration's proposal to strengthen the CRA and further reduce red-lining, Lloyd Bentsen, Secretary of the Treasury at that time, affirmed his belief that availability of credit should not depend on where a person lives, "The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live."
    Community Reinvestment Act - Wikipedia

    Since the govt was backing the loans there was no risk to the banks.

    It essentially ended the sub-prime loan market.
     
    somarco, Jun 19, 2019
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  5. somarco
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    somarco GA Medicare Expert

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    That is the way part of the Obamacare reinsurance program worked.

    Carriers that made a profit had to give it to the feds to redistribute to carriers that lost money. The result was, carriers tried very hard to AVOID making a profit. And 90% of the carriers left the market because of that incredibly stupid provision.

    Health insurance risk pools (when they existed before Obamacare) were funded via premium taxes.
     
    somarco, Jun 19, 2019
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  6. VolAgent
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    The statement is correct, the implementation was not. Where you live shouldn't affect your ability to borrow, your ability and likelihood to repay it should.

    Also, let's not forget Wall Street's part in this. They basically invented a new form of insurance, Credit Default Swaps, and went crazy.
     
  7. somarco
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    somarco GA Medicare Expert

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    It's a bit of a conundrum. Poor people generally don't live in mansions (unless they are sqatters) and rich people usually don't live in housing projects.

    No argument regarding Wall Street. Their fingerprints were all over it. But the idiots in DC relaxes banking rules making all this possible.
     
    somarco, Jun 19, 2019
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  8. VolAgent
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    I agree with your premise, however I think it, and the people who implemented it, ignore a core part of the statement. "...your ability and likelihood to repay it..."

    A person of lower to moderate income most likely cannot afford to pay the mortgage on a mansion. However, there present address should in no way affect their ability to borrow for a home they can afford.

    And of course, if you've never met a bill you couldn't ignore, then you should pay through the nose for any loan. If someone will even lend to you.
     
  9. Allen Trent
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    you are correct. I saw a NY times magazine article from 1999 or so that predicted what eventually happened. It was announcing the Clinton Admin pressuring Fannie Mae or whoever to force the loans to those with bad credit or low income. The prediction was it would have consequences when the economy turned downward.

    Fannie Mae Eases Credit To Aid Mortgage Lending
     
  10. goillini52
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    goillini52 MAGA...Eat More Bacon & BUILD THAT WALL!!!

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    This is included with every life and health insurance policy, but I haven't read it in a while. Doesn't cover variable annuities, because they aren't guaranteed. Seems pretty clear. :yes:

    NOTICE OF

    PROTECTION PROVIDED BY

    ILLINOIS LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION

    This notice provides a brief summary description of the Illinois Life and Health Insurance Guaranty Association ("the Association") and the protection it provides for policyholders. This safety net was created under Illinois law, which determines who and what is covered and the amounts of coverage.

    The Association was established to provide protection in the unlikely event that your member life, annuity, health maintenance organization or health insurance company becomes financially unable to meet its obligations and is placed into Receivership by the Insurance Department of the state in which the company is domiciled. If this should happen, the Association will typically arrange to continue coverage, pay claims, or otherwise provide protection in accordance with Illinois law, with funding from assessments paid by other insurance companies and health maintenance organizations.

    The basic protections provided by the Association per insured in each insolvency are:

    • Life Insurance

    ◦ $300,000 for death benefits

    ◦ $100,000 for cash surrender or withdrawal values

    • Health Insurance

    ◦ $500,000 for health benefit plans*

    ◦ $300,000 for disability insurance benefits

    ◦ $300,000 for long-term care insurance benefits

    ◦ $100,000 for other types of health insurance benefits

    • Annuities

    ◦ $250,000 for withdrawal and cash values

    * The maximum amount of protection for each individual, regardless of the number of policies or contracts, is $300,000, except special rules apply with regard to health benefit plan benefits for which the maximum amount of protection is $500,000.

    Note: Certain policies and contracts may not be covered or fully covered. For example, coverage does not extend to any portion of a policy or contract that the insurer does not guarantee, such as certain investment additions to the account value of a variable life insurance policy or a variable annuity contract. There are also residency requirements and other limitations under Illinois law.

    To learn more about these protections, as well as protections relating to group contracts or retirement plans, please visit the Association's website at www.ilhiga.org or contact:

    Illinois Life and Health Insurance Guaranty Association

    901 Warrenville Road, Suite 400

    Lisle, Illinois 60532-4324




    Illinois Department of Insurance

    4th Floor

    320 West Washington Street

    Springfield, Illinois 62767

    Insurance companies, health maintenance organizations and agents are not allowed by Illinois law to use the existence of the Association or its coverage to encourage you to purchase any form of insurance. When selecting an insurance company or health maintenance organization, you should not rely on Association coverage. If there is any inconsistency between this notice and Illinois law, then Illinois law will control.


    The Association is not an insurance company or health maintenance organization. If you wish to contact your insurance company or health maintenance organization, please use the phone number found in your policy or contact the Illinois Department of Insurance at [email protected].
     
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