Tucked quietly away in the verbiage of an article about MetLife retiring its mascot Snoopy after 31 years, Kevin Dugan documents what I first mentioned in my book Prescription For Wealth 6 years ago. And that is MetLife, in Dugan’s words, is “…looking to shrink itself in order to avoid being labeled ‘too big to fail.’”[i]
Being “too big to fail” means that financial institutions get special federal oversight along with distinct privileges that other companies simply aren’t eligible for.
Of course, as we know, insurance carriers are not allowed the privilege of declaring bankruptcy but they can and do become insolvent because of mismanagement and poor investment choices made by their executives and financial officers. And if this happens in a “too big to fail” company the executives and financial officers would be paid large sums of money by the government. This literally means they would be rewarded with tax payers’ money for making bad choices and decisions.
Most people find the “too big to fail” litmus test disturbing as well as disgusting. Why should tax-payers be made liable for the poor decisions of highly paid executives and financial officers! And furthermore why should executives and financial officers be rewarded for their bad choices and decisions? This type of logic is ludicrous because, tax-payers should never be made liable for such absurdity. In fact, that is why anti-trust laws are on the books today, in order to prevent any company from getting large enough to become a monopoly or “too big to fail.”
Owning life insurance underwritten by a smaller company that is NOT “too big to fail”, can protect you from being exposed to the risks mentioned above. The reason for this is, smaller companies who have earned good ratings based on their integrity, profitability, investment track record and over all fiscal stability and sustainability can provide you with greater security than you can find by tossing caution to the wind and picking a company that is “too big to fail”. Being Snoopy and checking around a bit can save you a lot of worries and troubles down the road. And we’re not talking about Peanuts.