It's Hard to Get Out from Under that TARP

(MoneyWatch)  CNBC commentator Jim Cramer got on his high-horse today about the insurers, Hartford Financial Services Group and Lincoln National, which took federal bailout money known as TARP.

Cramer has a point, although, as BNET colleague Daniel Harrison points out, he does tend to go over the top. These two insurers aren't part of the banking crisis that led to the huge bailouts last year, including that of American International Group, formerly the world's largest insurer. Hartford and Lincoln were both johnnie-come-latelies who, at least in Hartford's case, deliberately bought banks with a view toward grabbing that federal money. And both had maintained they were in good shape, at least right up until the time they got their hands on that federal money.

So Cramer was right to castigate them. But the point he missed, or may not have wanted to see, is that taking TARP money is its own worst punishment, and that no company wants to do it if there are other options. Taxpayers don't like giving it; they punished AIG for using their money to give bonuses to its executives. Companies don't like taking it; the banks who received it are trying to get out from under just as fast as they can, even repaying $68 billion of the money earlier than necessary.

And the stock market doesn't like companies who take it either, because it's a sign of weakness. Both Hartford and Lincoln shares have underperformed peers like MetLife. Four other insurers who had originally applied turned up their noses when they had the chance to get it in May. Nobody wants the government as a shareholder.

So it's not surprising that both Hartford and Lincoln are also doing their best to get out from under the onerous TARP burden as soon as they can. Lincoln has announced a plan to sell $500 million of common shares and $600 million of senior debt, not to mention the sale of its United Kingdom subsidiary for about $400 million. Hartford is selling $750 million of new shares.

To be fair, there is SOMEONE out there who likes TARP. Standard & Poor's raised its long-term ratings outlooks on both companies following their participation in the TARP program. This will certainly encourage investors worried about these insurers' solvency to step up and buy their shares. Both stocks went up early this morning. Hartford stayed higher, while Lincoln drifted lower.

Sure, they made some stupid decisions. They bet the stock and real estate markets would keep going up forever. But does that make them any dumber than the rest of us, including Cramer?