What happens if $700 billion isn't enough?
Insurance companies could follow mortgage holders in asking for help

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Posted: October 06, 2008
1:00 am Eastern

© 2008 WorldNetDaily


Now that the $700 billion bailout has been signed into law by President Bush, the question remains whether the flood of cash authorized by Congress will be enough to slow the wave of bankruptcies moving through the financial services industry like a tsunami.

As the bailout was moving through Congress last week, headlines were dominated by word of yet another massive bank brought to its knees by mortgage-related losses.

The stock market rallied during the day on Friday as the House moved to pass the bailout. But it closed down 157.47 points and finished the week at 10,325.38, even as President Bush announced his immediate signing of the law.

Wachovia, once the jewel of the southeast, found itself in a takeover bidding war where Citigroup's apparent winning offer was derailed by a Wells Fargo bid to pay $15.4 billion for the corporation.

But still waters may have been stirred up when Majority Leader Harry Reid told reporters "a major insurance company – one with a name that everybody knows – is on the verge of going bankrupt."

Reid named no specific company, but the shares of MetLife, Hartford Financial Services Group and Prudential all fell by double digit percentages.

Reid's comments were frightening because they suggest that if the crisis with mortgage-backed securities spreads beyond the banking and investment brokerages into insurance companies, the magnitude of the loss may be several times greater than the $700 billion Congress has approved to handle the entire financial services crisis.

WND has been warning for months the mortgage-related crisis will spill over into hedge funds and derivatives, two enormous pools of risk capital that typically are little understood, even by experts.

Red Alert detailed the $596 trillion – $0.6 quadrillion – in derivative contracts held at the Bank of International Settlements in Basel, Switzerland, raising the possibility that the worldwide financial services implosion will need to be measured in the trillions of dollars, not in hundreds of billions.

The financial world never has experienced a meltdown of this magnitude, and there is no bailout possible when losses reach these staggering sums.

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