Thursday, October 20, 2011

FL's Hurricane Fund $3.2B Short

The Herald reports that if a major hurricane hits Florida (or several smaller ones), the government sponsored insurance fund will not have nearly enough money to keep its promise to pay for the damage. Private insurance companies have pretty much withdrawn from the market or at least limited whom it will insure, because the state government limits what a private company may charge for premiums or otherwise interferes with coverage design.

The insurance coverage problem has been the case since Hurricane Andrew. What is "news" about the Herald report is that some experts looked at the problem anew and, lo and behold, it is even worse now.

Part of the problem is that the banks will not finance the acquisition of real estate without the coverage. The banks make money loaning money, however, and the state government wants Florida's real estate market to thrive. So, then, let's pretend that we have an insurance company of some sort that will supply that coverage.

There are a number of "let's pretend" games that our corporatist governments, state and federal, play. For example, let's pretend that real estate values will only go up; let's pretend that the key to social and economic success at the individual level is that a person "owns" his own home; let's pretend that owning one's home is the same as owning a small and volatile slice of equity in one's own home; let's pretend that people will tell the truth on their loan applications and that the bank's mortgage agent will not turn a blind-eye to the lies (after all, the loans will be packaged and sold to people in the rest of the world, like China sells its sickening wallboard). Government is full of "let's pretend" games. Furthermore, it's OK to play these games, because the taxpayer will indemnify any losses that occur.

PS: The Florida legislature has been dominated by the Republican Party for years and the Governor's mansion occupied by people from that party, not that the Democrats would have done any better. It's not the party, however, regardless of the posturing by the Republicans. It is the space in our economy we permit these people to occupy. As Pogo says, "We have met the enemy, and he is us."

No comments: