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CEI Asks: Is a Beach House Bailout Next?

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CEI Asks: Is a Beach House Bailout Next?

AIG’s Bailout Will Look Like Peanuts Compared To The Bill Taxpayers May Have To Foot To Cover Property Insurance Costs for Beach Houses Owned By Millionaires Like Tiger Woods and Sylvester Stallone

Contacts:
Eli Lehrer, 202-615-0586
Richard Morrison, 202-331-2273  

Washington, D.C.,
March 17, 2009—With the taxpayer bill for the AIG bailout mounting every day, a
Washington, D.C.-based free market think tank warned that the latest Wall
Street giveaway might be the tip of the iceberg as it raised questions about
proposals almost certain to come before Congress that would subject taxpayers
to even larger liabilities.

In 2008, the House of Representatives passed the “Homeowners’ Defense Act”
which would have set up an enormous government-run consortium—a national
catastrophe fund—that would provide reinsurance for insurance companies that
experience large catastrophe-related claims. These large claims are most likely
to come from hurricane-prone areas such as Florida’s
Gulf Coast and, ultimately, the money would
end up in the pockets of wealthy owners of beach-front property. Rep. Ron Klein
(D-FL), a lead co-sponsor of the 2008 legislation, has vowed to try again this
coming year.

“Tiger Woods, Sylvester Stallone, and John Travolta all own property near the
coast in Florida.
Donald Trump just sold his Florida
mansion for $100 million,” says CEI Senior Fellow Eli Lehrer. “There’s no way that
taxpayers should work to support lower property insurance rates for the
super-wealthy.”  

Lehrer says that proposals for national catastrophe funds would redistribute
wealth to people who already have a lot of money. “If taxpayers are
disappointed to see more than $100 billion of their money being risked on AIG,
then they should just wait for what some in Congress want to do next,” says Eli
Lehrer. “Florida
alone has just about $2 trillion in potential coastal losses but taxpayers
throughout the entire country could potentially be on the hook for the whole
amount.”

Lehrer says that inland states are likely to pay the bills. Citing a recent
study from former Clinton
administration official Robert Schapiro, Lehrer predicts enormous bills for
just about every state that doesn’t have lots of beach houses. “We’re talking
about nearly a third of a trillion dollars in one bad hurricane season—all to
help pay for property insurance for beach front-homes.”

He suggests instead that state government simply stop tinkering with insurance
rates. “While most Americans live somewhere near the coasts, only a handful
live right on the beach. Most people who own beach houses are wealthy. They are
the last people who need government help.”

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CEI is a non-profit, non-partisan
public policy group dedicated to the principles of free enterprise and limited
government.  For more information about
CEI, please visit our website at www.cei.org.