In stumping for the needed (though flawed) bailout bill yesterday, Harry Reid warned that an unnamed American insurance firm was teetering on bankruptcy. Those of us who cover Washington for a living have long since learned to ignore Harry Reid's every utterance. Unfortunately everyone can't afford to be so blasé. Reid's idiotic comment has had a profound effect on both Wall Street and Main Street today. MetLife for one felt compelled to publicly declare they weren't Reid's endangered carrier. Fine good it's done them. As of 12:15, their trading price had plummeted 10%.
Predictably, Reid's comment has hammered the entire insurance industry, giving our economy one more major headache when such a thing was least needed. Now when I say this effect was predictable, I'm speaking only for people with common sense and not necessarily senate majority leaders. As of midday, here's where the insurance industry carnage stood along with the corresponding financial loss:
MET down 10.7% or ~$3.6Bn
PRU down 3.8% or ~ $1.4Bn
AFL down 4.14% or ~$630mm
TRV down 3.75% or ~$950mm
As Harry Reid doubtlessly understands, the above figures just reflect the damage done to common stock. The story is similar when it comes to preferred stock. For those of you who prefer the big picture, the S&P 500 Insurance Index is down 4.5%, or $15 billion. Think of all the wooden arrows you could buy with that kind of chunk of change!
Such incidents leave me grasping for ways to understand the economic ignorance of much of our political class. Reid could have made the exact same point without referring to a specific industry, right? And he surely knows that the markets are a touch jittery these days, correct? And yet he said what he said.
At tonight's debate, Gwen Ifil will probably give both contestants a chance to display their understanding of the present crisis. The contenders will pull this off with varying levels of skill. Hell, they may even do great. But as Harry Reid ably demonstrated last night, one can hardly overstate how poorly the political class as a whole understands complex economic matters.
