Florida Doesn’t Deserve a Federal Bailout, Think Tank Says

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Washington, D.C.,
February 10, 2009—Florida Insurance Commissioner Kevin McCarty is in Washington, D.C. today
lobbying Congress to grant Florida
an unlimited line of credit to bail out its Hurricane Catastrophe Fund. The
“Cat Fund” as it is popularly called, provides subsidized reinsurance – insurance
for insurance companies – to primary insurers covering homes and condominiums
in Florida.

The fund, which imposes a potential $32 billion liability on
the state of Florida,
has only $2.8 billion in hard assets and plans to issue bonds to cover other
liabilities. Given that no state has ever sold more than $11 billion in bonds
all at the same time, however, it appears unlikely that Florida could even come close to paying the
Cat Fund’s debts.

“Reliance on a Federal bailout as official state policy is
reckless at best,” said Competitive Enterprise Institute Florida Office
Director Christian Cámara. “Instead of lobbying Washington
politicians for money, Commissioner McCarty and Governor Charlie Crist should
return to Tallahassee and work together with the
legislature to restore a healthy, competitive insurance environment to ensure
that Florida
is able to weather the aftermath of a storm. Taxpayers should not be forced to
bailout neither Florida
nor the politicians that have placed the state one storm away from economic meltdown.”

“This is a really, really bad idea,” says CEI Senior Fellow
Eli Lehrer who directs’ CEI’s Washington-based Insurance Project. “We’ve
already done far too many bailouts of private companies. State governments – particularly
ones that make bad decisions – don’t need bailouts as well. Congress should say
‘No’ to Kevin McCarty.”

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.

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Florida Doesn’t Deserve a Federal Bailout, Think Tank Says