By Avi Klein on March 30, 2009 3:03 PM | No Comments | No TrackBacks
When the Treasury Department announced that it would spend $700 billion to bail out the nation's banks, a number of insurance companies saw an opportunity. If they became banks, they would be eligible for government money at cheap terms.
Six months later, it's looking more complicated than they imagined, with at least one insurance company changing its mind, and others still waiting to hear back from Treasury.
Earlier this month, for instance, federal regulators agreed to extend the deadline for The Hartford Financial Service Co. to close its pending purchase of Florida-based Federal Trust Bank to March 31.
When it applied in November to buy the struggling savings and loan and seek money under the Troubled Asset Relief Program, Hartford said it could get as much as $3.6 billion in bailout money.
The purchase has not been completed, however, and a Hartford spokesman refused today to say whether he now expects the deal to go through. The company has said that the deal is contingent on Hartford receiving TARP money.
A call to Federal Trust was not returned before deadline. The Office of Thrift Supervision, which must approve the deal, would not comment.
Hartford has struggled in the past year to maintain adequate capital levels, and has also had to address issues related to the Allianz Group, a German financial company that owns a partial stake in Hartford. Banking regulations limit the ability of foreign-owned companies to control American banks.
Other insurance companies have found buying a bank more difficult or less attractive than they might have originally thought. Dutch financial services firm Aegon N.V., which had considered buying Maryland-based Suburban Federal Savings Bank through one of its U.S. subsidiaries, later withdrew its application.
Still others have found that buying a bank doesn't automatically entitle them to bailout money. Lincoln National Corp., which bought Indiana-based Newton County Loan and Savings, is still waiting to hear back from Treasury about its November application for TARP money.
Genworth Financial, which reached an agreement in December to buy Minnesota-based Interbank, also is waiting to hear back from federal regulators about the purchase and from Treasury about its TARP application.
