Imagine you went to get your driver’s license. You studied up on your state’s requirements. You learned the rules of the road. You practiced driving in your neighborhood under the watchful eyes of your mom or dad. And then when you went to the DMV, you passed the written and driving tests with flying colors.

Now imagine that you ran into someone in the waiting room who conceded he hit the sauce before coming in. You watched him flub the written test. Then you heard he crashed into the curb twice during his driving test — and spent most of the ride hitting on his instructor.

You’d expect to get your license — and you’d expect the other guy to fail, or maybe even get hauled off to jail.

But in Washington, D.C. these days, that’s not how it works. Everybody passes! It’s like some perverse Lake Wobegon world, where everyone is above average (or treated that way).

And it should have you, me, and every other American taxpayer fuming.

D.C. Doling Out TARP Money to Any and All Comers

There are a lot of bad banks out there. A LOT. As Martin explained earlier this week in his special presentation (which you can access to replay online here):

“The debt crisis is much greater than the government has reported, according to the white paper. The FDIC’s “Problem List” of troubled banks includes 252 institutions with assets of $159 billion. The updated review by Weiss Research, however, shows that 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in the prior quarter.”

But there are also literally THOUSANDS of institutions that are NOT at an elevated risk of failure.

They did NOT take on excessive, stupid risk in the derivatives market.

They did NOT make a bunch of crappy residential and commercial mortgage loans.

They did NOT buy a bunch of esoteric, hard-to-value securities in an attempt to juice up the yields they earned on their portfolios.

The same goes for the insurance industry …

We just learned this week that life insurers have joined the seemingly endless line of companies seeking — and getting — government-funded bailouts. The Treasury Department is going to infuse capital into life insurance firms that are organized as bank holding companies or that own a thrift subsidiary. Many of those firms have seen their share prices plummet and their investment portfolios come under pressure.

But you know what? For every poorly run insurer that took on too much risk in their investments and charged too little in premiums, there’s another firm that’s in much better shape.