Wall Street Now Wants to Profit by Selling "Death Bonds"
Grotesque? Macabre? Unquestionably, but that is what we have come to. After leading the economy to the edge of the abyss, a new derivative has been concocted in a perverse quest for big and bigger bucks. The New York Times screamed the story with a three-column headline on Sunday's page one "Wall Street Pursues Profit in Bundles of Life Insurance".
It works like this. The banks would buy "life settlements" that the ill or elderly -- or anyone who has a policy for that matter -- would sell for an immediate cash payout and depending on their life expectancy at time of sale, at a significant discount to the policy's death benefit. These policies would then be "securitized", that great Wall Street mumbo-jumbo word, by packaging "hundreds of thousands of policies together into bonds" whose owners will be receiving payouts when those who are insured die. Happy way to earn a buck.
Insurance companies, in anticipation of this new financial "product" impacting their industry have highlighted a few cautionary issues to their policy holders, among them:
-After the sale, the insurance policy will remain in force until your death and an unknown person, trust or institution will own the policy. The policy may be resold a number of times before your death, making it virtually impossible to know who owns the policy on your life.
-Because a policy will remain in force after a sale, you may be precluded from purchasing new life insurance or from replacing existing insurance on your personal or business planning.
-Since the policy may be resold you may be contacted by the owner of the policy inquiring about the status of your health. Since the policy may be resold repeatedly similar contacts may be made by different individuals in years to come.
It was bad enough to have the Wall Street whiz engineers concocting derivatives, credit default swaps and myriad other instruments that caused financial havoc while our government agencies snoozed away. And now, in today's world, conspiring to formulate the height of malign financial exotica, in effect organizing a huge "put" market on American lives. It has the smell of inviting disaster.
In this age of terrorism and weapons of mass destruction consider the bonanza that would accrue to the holders of these "bond instruments" if events conspired to make a massive number of the policies due and payable. Far fetched?
After 9/11, London's The Observer reported on September 23, 2001 that Ernest Welteke, the president of Germany's central bank, the Bundesbank, said a study by the Bundesbank pointed strongly to "terrorism insider trading in the days leading up to this month's carnage in the U.S." Insurance companies' stocks with significant exposure to damage claims fell sharply in the days before the attack. Further there were an unusually large number of put options traded on United Airlines and AMR shortly before the event, among other transactions.
That is what the world of financial markets has bequeathed to us. Not only a failed system of "derivatives" and commodity pricing, but a channel through which the perpetrators of murder and mayhem can manipulate trading exchanges to their profit, and in certain cases to set in motion a chain of events where profit itself becomes the primary motive of events that might otherwise not have come to pass, were there no "trading profit" to be gained.
Only a government and its agencies fitted with rose-colored glasses would permit as perverse a financial instrument as "death bonds" of such lethal potential to gain legitimacy. It would be an act of extraordinary danger and irresponsibility!
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Outlaw all Derivatives,
That will force investment back into main street.
I guess we should change the name of life insurance to death insurance and health insurance to sickness insurance. Calling the investment vehicle a "death bond" has no more validity than calling it a "life bond".
With my childhood disabilities, life insurance has been the last financial hurtle I've been really struggling with and haven't managed to find a good answer for yet. I've been trying to cobble together enough life insurance from different sources so that I can get married and buy a house since I'm not eligible to buy enough from my employer, only really enough to cover the funeral and end of life medical expenses not paid by other insurance. It wouldn't pay the balance on a house.
It doesn't seem to matter how hard you try, someone is spitting on you. I'm beginning to thing the answer is to just move to another country, just like so many other young people are doing.
In an interview this morning, Michael Douglas was plugging the new Wall Street 2 movie. He related an anecdote about once meeting some wall street traders who expressed their admiration for his character in the original movie as a 'hero' to them. Both Mr. Douglas and his hosts found the story funny. I found it reprehensible and indicative of the piratical mindset of wall street. Apparently, trading requires a relinquishing of basic values and a glaring inability to feel or express empathy--p
I found it telling that the audience and hosts all laughed. Are we really that stupid and shallow, that glibly unaware of the implications for how wall street will control our future?
But who in government is willing to listen>
Who is willing to regulate?
They haven't even responded to the destruction of our base economy by Wall Street traders knowingly selling bad paper to keep their transaction fees coming in.
If Wall Street had its way, they would bottle-up all atmospheric oxygen and force us to work for a canister a day and some food. After all the houses are foreclosed, they would store us in warehouses like battery hens. Then when we are too old or ill to work, they would withold a canister from us and cash in on the insurance policy. Murder ? No, a mere rationalizing of corporate resources.
When the toxic assets ripen, there will be nothing to foreclose except warm bodies. They will either need to kill us or drop all of our protections - medicare / medicaid / FDA / environmental etc to help us shuffle off the mortal coil.
Ohmygosh! Not another heads we win, tails taxpayers lose bubble in the works.
There is NOTHING they do not control. HAIL WALL ST!
Here's the silver lining to this cloud:
at least the insurance companies issued a warning that contains only valid information.
There's no doubt at all that such products cannot possibly survive any meaningful consumer protection regulation or indeed any meaningful oversight. It would be a multifold repeat of the dysfunctional side-effects of CDSs. Now CDSs can be tamed by trading them transparently in exchanges instead of over the counter.
But nobody is going to propose an exchange based trade of bets long and short some particular person's death, no?
The 'anonymity' coming in through the slice-and-dice simply means that the products are doomed to fail at their birth - pun intended. It's clear that these securitizations suffer from several times the opacity that brought down mortgage backed securities. And if you remove the opacity, there will be serious conflict with law. So: fuggetaboutit. Ain't gonna work.
Sorry for the cynicism, but maybe the only thing that helps is to lay out why this product is even BS from the point of view of finance.
And then the insurance companies who need somewhere to invest the premiums coming in can buy up shares of these "securitized, repackaged, sliced and diced " policies.
What could possibly go wrong?
Yes indeed, insurance companies are known in Wall Street parlance as the "buy side". This has "train wreck" written all over it.
How positively American! I just love it. Wall street betting for mass destruction.
How about wagering on when Main Street marches on Wall Street with torches and nooses?
Why not? We plan to give Wall Street full control on energy with cap and TRADE. Give them the ability to also trade our death.
PLEASE CAN YOU STOP THIS BEFORE IT DEVELOPS LEGS AND WINGS.
The older population will be very confused with this kind of sale.
IS THIS A 'HURRY UP AND DIE' MESSAGE FROM THE INSURANCE COMPANIES - AGAIN.!!!
One more reason NOT to buy life insurance. The fewer the number of people who are financially invested in your death (esp.those who have no love for you), the longer your life expectancy.
I agree!
This is what Bribery can do.
This is what happens when the laws of the land are not enforced, and when public officials knowingly become criminal accomplices.
Crime does not EVER stop on its own. It only finds new things to steal, new ways to swindle, new damage to inflict. As long as anyone will listen, it will say "this is the way it must be." It will pay millions of dollars a day in bribes (and extortion and blackmail) to get its way.
But this they did not consider: there are 307 million plaintiffs.
Also this they did not consider: finance, banking, and insurance are all "mission critical" to any society. They are not a gambling den.
They are sitting in a barn that they are perfectly willing to burn down just to gamble on the temperature of the flame. And then they plan to gamble on the color of the ashes. But they are blinded by their own greed and avarice ... just as countless foolish men have been throughout many centuries before our own.
"Game over. You are, all, under arrest."
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