Fed Okays Move By Insurers To Secure Bailouts

WASHINGTON–The Federal Reserve Board has approved the applications of Hartford Financial Group and Protective Life Corporation to acquire troubled savings and loans–a move that makes them eligible for federal bailout money.

At the same time, the Office of Thrift Supervision said it has approved the application of the Phoenix Companies, Hartford, Conn., to acquire American Sterling Bank, based in a community near Kansas City, Miss.

The insurers made the acquisitions in an effort to meet standards set by the Treasury Department to receive funds under the agency's Capital Purchase Program, a pool of some $250 billion that is part of the $700 billion federal Troubled Asset Relief Program, or TARP, often referred to as the “bank bailout” program.

The application of Genworth Financial, Richmond, Va., to become a thrift holding company and then acquire a thrift is still pending, according to a spokesman for the Office of Thrift Supervision. Fed approval for Hartford and Protective came through late Wednesday.

Genworth is the last-known remaining insurer that has applied to become a thrift holding company in order to receive funds under the CPP program.

Under guidelines issued by the Treasury Department when it started the program, federal agencies were supposed to complete work on the applications for insurers and others seeking to establish federally regulated units by Jan. 15.

The Hartford before it could move on its acquisition saw the Fed last week approve the application of foreign insurer Allianz SE, Munich, to acquire an interest in Hartford that could reach $4.25 billion if Allianz exercises warrants it was granted in the Oct. 6 deal. That would give Allianz a 30 percent stake in the company.

The Fed approval was the last step needed for Hartford to acquire Federal Trust Corporation, a unitary thrift holding company based in Sanford, Fla.

Last week, Hartford and Lincoln National Corporation, Philadelphia, received approved to become savings and loan holding companies.

In its public statements, Hartford said it estimated that it would be eligible for a capital purchase of between $1.1 billion and $3.4 billion from the CPP under existing Treasury guidelines.

Hartford has agreed to pay $1 a share, or $10 million, for Federal Trust, and to add capital to the institution to ensure it is adequately capitalized.