The government is now insuring insurers. Guess who's at the center of the drama.

In honor of spring cleaning, it's worth taking inventory of what's underneath the TARP. We've got some disgruntled banks, some rusted-out car manufacturers, and the morbidly obese AIG, which seems to get smellier every day. And, oh, what's this newest addition? Life insurers? Who let them in here?

These days, the TARP is acting more like a big tent. When Henry Paulson and friends originally designed the Troubled Asset Relief Program, it was only supposed to be used to facilitate auctions for toxic assets. But then everybody and their mother needed saving and we only had so many facilities to provide capital, so the TARP became an all-purpose, $700 billion behemoth. Adding in life insurers, as the Wall Street Journal is reporting the government plans to do, is just more proof that the TARP's mission creep has turned it into a refugee camp. But before welcoming life insurers into the fold (likely costing tens of billions of dollars), it's worth stopping to ask why they were invited into the TARP in the first place. The answer should come as little surprise: It all has to do with AIG.

The idea that the government would bail out life insurers isn't new. We've been doing it for the past six months with AIG. Ostensibly, the reason we had to bail out AIG was because of its financial-insurance policies. If those failed, we were told, the whole economy would collapse because the derivatives would fail, there would be no backup plan for financial investors, and that would cripple the banks. But financial instruments aren't all that AIG insures. It has a host of businesses, and life insurance is one of its breadwinners. All these businesses are connected (at least until AIG splits itself up and sells some of them off), so by bailing out the financial insurance piece of AIG, we also bailed out the life-insurance portion. TARP money is definitely fungible.

And it's not like the government was upset about bailing out the life-insurance portion of AIG. A few months ago, AIG went back to the government to ask for an extra $30 billion because they were, once again, teetering on the brink. To convince the government to pony up the money, they prepared a hubris-soaked PowerPoint titled "AIG: Is the Risk Systemic?" Unsurprisingly, the presentation's answer is, yes. The slides are about the myriad ways AIG sits at the center of America's economy, with no element being more important than its life-insurance business. After saying, "The systemic risk is principally centered in the 'life insurance' business," it goes on to list stats about just how important the life insurance industry is: 2.3 million employees, 375 million policies, $19 trillion on the line.

In other words: You think the economy would suck if our commercial insurance went bad? Just try living without our life insurance. Needless to say, we gave them the requested $30 billion.

By giving AIG the money, we were admitting that we couldn't let the life-insurance industry fail, either. The government's rationale for letting all life insurers into the TARP is, ironically, laid out perfectly in AIG's presentation. The worries, itemized for your convenience, are these:

1. An insurer--MetLife, for example--goes under.

2. The policies held by MetLife go bad, since there isn't an insurer backing them up. Many people lose money; many people cry; many impale Snoopy with a pitchfork.

3. Word gets out about the havoc for MetLife clients, and other Americans get worried that they, too, would lose their policies if their insurance company vanished.

4. There's a run on the insurers, with everybody trying to cash out their policies at once. Just like a bank run but everybody's old.

5. Bled dry by so many people trying to take out their deposits at once, the insurers go bankrupt.

6. Those who didn't participate in the insurance run lose their policies, regretting that they didn't partake in the very panic that rendered them broke.

7. Americans' ability to ensure the financial happiness of their children is ruined.

8. The American dream withers. Because if there's anything our economy still believes in, it's that the next generation should have it better than the last.

That chain reaction is why the government felt it had to let the life insurers in. The industry was too wobbly in too precarious of a position for us to stand by without doing anything. Thus, the TARP extended its invitation, just as it did when AIG presented the same logic in its presentation. Once the government capitulated to AIG's systemic-risk reasoning, we should have known it would entail bailing out other life insurers, too. Even when we bail AIG out to try to stop its dominoes from falling, they end up falling in a different, unexpected direction.

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It's important to note that Geithner and friends are trying to create an FDIC-type body for life insurers that would protect a failed insurer's clients. If that body is created--and since Congress is involved, it may take a while--the apocalyptic logic chain mentioned above would, in theory, no longer be valid since the systemic risk would be muted. Just as the FDIC prevents a national bank run after a small bank closes, this insurance insurer would stem a claims panic. Once the FDIC-type agency was created, one would assume that the insurers would have no further use for TARP funds, and they'd pack up and leave the program. Or, in an ideal world, we'd just kick them out.

(Photo of AIG building by Dan Kitwood/Getty Images)