Comments on: Bailing Out Failed Management: Health Insurance Company Edition

By: notinyourlifetime

notinyourlifetime — Tue, 06 Oct 2009 17:05:42 +0000

Eureka,

Your kidding right? “Hey demi, Goodwill has long been Goodwill Industries… very much a for profit entity.”

If you can’t even figure out that Goodwill Industries is a not-for-profit then, please don’t post. It shows your lack of knowledge.

By: TruthandJustice

TruthandJustice — Tue, 06 Oct 2009 16:51:04 +0000

I think this illustrates why we have not seen any major prosecutions related to the banking crisis last year. The entire American economy is one giant scam. I would speculate that most of the major corporations’ books could not stand up to a true audit. A good indication on how “cooked” the books are is to look at the size of the CEO’s financial “rewards”. Since the late 1970s these MBA frauds have treated the corporations they are supposed to be stewards of as their own personal piggy banks. They suck out as much money as they can as quick as they can and to hell with the future of the corporation. The whole mantra of “maximizing shareholders wealth” is a sham. As long as they keep the top 10 - 20% of the shareholders happy (usually through insider information) they can plunder the corporation with impunity.

Ask any small business owner what would happen if they tried to keep their books the same way and the answer would be “prison”.

This is not Capitalism - I call it Fraudualism. Profit before God, Profit before country, profit before family!

By: ShotoJamf

ShotoJamf — Tue, 06 Oct 2009 15:48:50 +0000

I’m late in responding to your comment but I concur with you 100%. I’ve seen intangibles up close and personal, and I can tell you that most of the time the various line items have turned out to be crap. First off, idiots with overstuffed egos made decisions to purchase companies for way more than they were worth. Subsequently, the accountants were led away (by any means available) from making fair valuations of those items. Further, given the accounting firm’s motivation to hold onto the client, the partners too often grease the skids, look the other way. It’s a vicious cycle. Dissolution of these companies would get really ugly, lemme tell ya…

By: marcos

marcos — Tue, 06 Oct 2009 06:01:08 +0000

Serf’s up!

By: alank

alank — Tue, 06 Oct 2009 02:50:28 +0000

So, these things constitute something that needs bailing out, as much as investment banks and automotive business needed bailing out. That’s the underlying motive for the so-called reform effort.

Was any of it necessary? Are there firms too big to fail. Apparently there are as far as Bush and Obama are concerned.

By: Phoenix Woman

Phoenix Woman — Tue, 06 Oct 2009 02:12:21 +0000

Wow — good catch!

By: JugOPunch

JugOPunch — Tue, 06 Oct 2009 01:36:38 +0000

Assets = Liabilities + Shareholders Equity

Good will is an intangible asset. LBO anyone?

Liquidate the shareholders’ equity and capital gains for the masters accrue.

By: Hugh

Hugh — Tue, 06 Oct 2009 01:35:31 +0000

There is a lot of luck in this, but the point is that concentration creates risks for the bigies as well as profits.

As Yves Smith at Naked Capitalism likes to point out, efficiency in banking gets lost above a medium sized bank. Beyond that, managers don’t know their communities, their book, or their operations. So as banks increase in size beyond this point they are more likely to pose systemic risk. Regulation can help but the real size related problems remain.

By: Hugh

Hugh — Tue, 06 Oct 2009 01:27:17 +0000

Hugh, one issue for these guys is the amount of write-offs coming on mortgage-backed securities. Wellpoint has about $4.1bn in these at 12.31/2008, showing about $136mn write-downs. It’s hard to guess what the real exposure might be.

Offhand I would say the exposure is in the neighborhood of $2.5 billion using a 60% write off. We have seen figures similar to this in some bank failures. It could be higher if Wellpoint got into fancier instruments.

By: earlofhuntingdon

earlofhuntingdon — Tue, 06 Oct 2009 01:24:24 +0000

Nice comment. Something seems lost in translation from Canadian to American English.

Inside the Beltway, it seems, more careful observation or outright regulation of an actor so big that its dysfunction or bankruptcy could imperil the economy is deemed naughty. Americans respond to the need for regulation and consequences only when it comes to sex.

When a wealthy Democratic governor pays for prime Washington satisfaction, he’s encouraged to step into the political wilderness, lest the feds federalize prostitution and indict him for, well, they’ll think of something. Even about sex, the Village can’t make up its mind. When a Southern Republican Senator has sex with prostitutes while wearing diapers filled with his own excrement, the press and his Congressional peers declaim that there’s “nothing to see here, move along”.

The latter seems to be the route both Democrats and Republicans are taking when it comes to regulating banks and health insurers: “Nothing to see here, move along. But pay the ticket taker on the way out or we’ll nail your ass.”