Perverse Incentives...

and unintended consequences...companies taking shareholder capital to appear more sympathetic when they kiss the ring of the Treasury.

Lincoln, Aegon May Buy S&Ls With `Unsafe' Practices to Get Aid

By Andrew Frye and Linda Shen
Nov. 17 (Bloomberg) -- Four of the world's biggest insurers may acquire small banks that regulators have cited for improper practices to improve their own chances of getting cash from the $700 billion U.S. government bailout fund.
Lincoln National Corp. and Aegon NV, owner of Transamerica Corp., may buy savings and loan companies in Indiana and Maryland whose methods were found to be ``unsafe and unsound'' by the Office of Thrift Supervision. Hartford Financial Services Group Inc. is acquiring a Florida lender that was told by the OTS in May to curb lending. Genworth Financial Inc.'s target got a ``cease-and-desist'' order tied to potentially fraudulent loans.
Purchasing thrifts may allow insurers to qualify as savings- and-loan companies and tap the Treasury's Troubled Asset Relief Program. Hartford's $10 million acquisition of Sanford, Florida- based Federal Trust Corp. may entitle it to $3.4 billion of U.S. capital. Lincoln National in Philadelphia may win access to $3 billion by taking over Newton County Loan & Savings, which has three full-time employees and $7.3 million of assets.
``It's perverse,'' said Jason Arnold, a San Francisco-based analyst at RBC Capital Markets. ``Almost anyone can buy a thrift. At a certain point, regulators will have to put a stop to it.''