The News Review:
- Paulson’s financial reform plan gets mixed response
- Piggyback loans vs. mortgage insurance
- Investing in insurance to beat the year end deadline?
- LIC’s poor show begins to hurt life insurance growth
Paulson’s financial reform plan gets mixed response
USA Today – Mar 29, 2008
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The Treasury Department plan, the product of consultations with financial market participants, academics and former government officials, takes aim at what it calls an outdated regulatory structure that financial innovation has left behind. The blueprint would:
•Replace a welter of federal agencies with three main regulators charged with ensuring stable markets, safeguarding federally guaranteed institutions such as banks and protecting consumers. •Introduce federal regulation of the insurance industry with the creation of an optional federal charter to supplement the state-level system that’s been in place for 135 years. •Create a Mortgage Origination Commission to pass judgment on state oversight of the mortgage industry. •Merge agencies that oversee securities and futures trading — the biggest change for the Securities and Exchange Commission since its creation in 1934. On Capitol Hill, Paulson’s proposal drew a cool reception from the majority Democrats. Even those who welcomed it said they don’t see it passing in an election year… “Presumably, the firms themselves have the greatest knowledge of the risks they undertake,” Faucher wrote in a research note. “Yet during this crisis, the players clearly misjudged the risks in mortgage-related holdings. Could the Fed be expected to do better?”
Insurance industry: States could lose power to regulate
In the insurance arena, the blueprint recommends revising the historic state-by-state regulatory network by giving insurance companies the option of seeking a federal charter and Washington oversight. Long sought by the insurance industry, the proposal mirrors an option already available to banks. The plan calls for creating an Office of National Insurance, led by a federal commissioner, within the Treasury Department. That agency would be subject to congressional oversight. Such sweeping changes would likely involve lengthy Washington debate.
Related: Aviation Markets: Studies in Competition and Regulatory Reform…
Piggyback loans vs. mortgage insurance
Seattle Times – Mar 29, 2008
mortgage insurance By. A piggyback is a second mortgage taken out at the same time as a first mortgage, as a way of borrowing a larger total amount. The first mortgage is for 80 percent of property value, and therefore does not require mortgage insurance, while the piggyback is for 5 percent, 10 percent, 15 percent or 20 percent of value. Instead of a mortgage-insurance premium, the borrower pays a higher rate on the piggyback than on the first mortgage. Whether a piggyback saves the borrower money relative to mortgage insurance depends on many factors, including the rate on the piggyback relative to that on the first mortgage.
Related: Fed to auction $50 bln at short-term auctions in April
Investing in insurance to beat the year end deadline?
Economic Times – Mar 29, 2008
While it is important for individuals to have
some risk cover, it is equally important that they buy insurance keeping both
their long-term financial goals and tax planning in mind. However, investors should not buy an insurance policy just to save on tax, there
should be a well thought-out plan behind the purchase decision of the insurance
policy. The first thing an investor should do before buying an
insurance policy is to evaluate his insurance needs and then narrow down on the
most appropriate policy types.
LIC’s poor show begins to hurt life insurance growth
Economic Times – Mar 29, 2008
2% as of
end-February. The slowdown is
largely on account of Life Insurance Corporation (LIC), which despite adding
over Rs 2,152 crore to new business, saw a meagre growth at 5%. This is due to a
huge base created by the previous year?s 118% growth. However, the private
life insurance industry continues to grow at a high rate of 82% this year.