Death Derivatives: Wall Street Casinos aim to 'securitize' life insurance benefits
Where have we heard this one before? When Wall Street turns the life insurance market into the same toxic mess as the mortgage market and the big banks walk away with hundreds of billions in profits, then let some made up firms default, who's going to be left holding the bill?
Not to worry, since the SEC watchdogs and those sterling reliable ratings firms will do their jobs, right?
Death Derivatives anyone?
Maybe this is the true 'death panels?'
Wall Street Pursues Profit in Bundles of Life InsuranceYes, our Congress will 'debate' new regs as soon as they finish off that 12 yo bottle of Scotch, topped by a few lines of Peruvian flake and get thru playing with those frisky hookers sent over by Wall Street banking lobbyists.... and find another offshore account to deposit some cash that was donated to their 'election' fund.... and make sure Israel has all the money and weapons it needs to keep terrorizing the ME and continue with its ethnic cleansing of Palestine.
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.
The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
Even as Washington debates increased financial regulation, bankers are scurrying to concoct new products.