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.
This isn’t a new idea. These “mortality bonds” have been around for quite a few years now. If you have a life insurance policy, and nobody you care to give it to (although why you’d have one in that case is beyond me) I could see doing this. Sort of like a morbid version of a reverse mortgage.
Seems pretty shady to me, just the kind of ‘clever-assed’ thinking that got us into the current crisis. Somebody ought to get these guys real jobs.
This is the WORST Republican health insurance reform plan yet proposed yet.
Man, you guys are just screwed on the health care front…
Tricky Dick let the HMOs take over and slowly destroy your previous system and it just seems to get worse as the time goes on.
Dems want the Fed to take over, Reps freak out…
Reps want some kind of reform but are so obsessed with blocking HR3200 that they simply come across as anti-reform.
Just a flat out mess…
Start out simple. Just get the Fed to mandate that the States are responsible to arrange for a minimum care standard so that each state and its people decide how to deal with the issue. IF they are happy right now, leave it alone. Otherwise, change it as they independently see fit.
But for the love of God, do not let the Fed or the Banks or Big Ins/Big Pharma have anything close to a controlling interest. It would be the proverbial fox in the hen house.
“Aren’t most investment bankers Republicans?”
They are overwhelmingly Democrats.
It was really popular a few years ago when I would receive calls from my bank card companies asking me if I wanted to sign up for a free $50,000 life insurance policy, gratis for being a card member. Of course the real policy is for $250,000 of which your beneficiary gets $50,000 and the bank pockets $200,000.
There is a good story about Jeanne Calment, the oldest living person in the world at the time of her death. At the age of 90 she signed a reverse mortgage with a 47 year old lawyer. The lawyer died at the age of 77, one year before Mrs. Calment. When asked about the circumstance she replied, “In life, one sometimes makes bad deals.”
Uncle Dave and Dallas get pwnd again by Minatti. You fellows and your insistent party loyalty are what the real problem is with America.
Lets be clear here boys, and your way of thinking is boyish immaturity, BOTH PARTIES are at fault. BOTH PARTIES are one big same thing.
Washington D.C needs to be severely reigned in, term limits instituted, and power of taxation and public policy returned to the states. Most Americans live in their state not in D.C, return them their constitutional right of self governance and end these train wreck out of control career politicians that are stealing your future.
I remember hearing about a woman in france who had one of these policy’s. She took it out in her mid 80′s. The deal was she had all her nursing home care paid for. In return the investor got all her assets upon her death. She lived to be 109, I think it was, and the investor went broke.
They’re just waiting for Cap & Trade so they speculate up our energy costs and really get rich.
Greed is the foundation of capitalism. How do you expect it work without it?
Cash register tapes are worth more than gold to these investment bankers.
Next time you use that savings card at the grocery store, you might ask yourself “what are they going to do with all that data they collect on every single item I buy?”
God bless america, assuming we survive it.
Uncle Dave snarks: Oh, wait. Aren’t most investment bankers Republicans?
Oh, wait. Aren’t most investment banker regulators in Congress Democrats?
Seems to me the Repuglicans vote is IN THE BAG and will vote for any Investment Bubble that comes their way. The Dem’s need convincing/bribing/hush money, so they get the lions share.
Who’s to say what it means “except:”
VOTE ALL INCUMBENTS OUT OF OFFICE.
#4 Fox in the henhouse? In the US all henhouses come with the fox included. And the little bastard’s smarter than Bugs Bunny. I’d say it’s time to get the hell out of the chicken business. Oh and what’s with this either/or business. I mean if you don’t like plan A or B, think up a plan C, right? There’s plenty of alternatives. Everyone should have a RIGHT to basic life support, but that doesn’t mean the government should pay for your ingrown toenail or even for the pediatrics for your pregnant wife (with some exceptions). What makes socialized medicine inefficient is the way people show up at the hospital emergency room with a head cold. So put some limits.
#15,
I really wish some one would come up with a way for us to buy a buffet of options. Start with something simple like catastrophic coverage. Then you add things on and pay extra for things like wellness coverage and mental health care. Pediatric and natal care would have their own plan.
Also if you look where the really huge cost center is, that last year of cancer treatment, just let us take the option to buy coverage that only grants hospice care, but does not include that end of life cancer coverage.
Once again, our health care system is buckling under the tyranny of old people with cancer care. Dude, you have pancreatic cancer, you are gonna die. Why should the rest of us have to pay so you get six extra months of crap life?
Something that is being lost from this debate is that Republicans are the ones arguing for wasteful unlimited end of life spending. Republicans are directly responsible for the health care crisis.
#15–amadamadumdum==how come the socialist health care systems cost half of what the USA spends? Its because dum-dum using the ER for primary care is NOT SOCIALIST MEDICINE.
Seems to me your intelligent posting level is declining faster than Obama’s popularity. Does salivating turn your brain to goo?
This describes this practice. The risk is mostly assumed by the investment banker/investor, but is risky. If the insured has not long to live, they can benefit from all that life insurance themselves prior to death. Beats being unemployable due to health concerns, and homeless. If you buy one of these as an individual, you can loose your shirt, however, if as previous posts state, the insured lasts longer than anticipated.
#12 When I filled out the form for my Safeway Discount card, I put in totally bogus information. The card works fine, and nobody knows who is buying all the stuff I purchase. Just in case you want to re-apply for a card using a fake name, address, and phone number.