The geniuses on Wall Street have found another way to gamble and call it investing. Forget about mortgage-backed securities (wouldn’t that be nice?). Life insurance securitizations are the new hotness on Wall Street. And the fun part is, they make more money when you die faster.
Maybe death panels will make a comeback.
The New York Times explains how it works:
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. [Link]
Will someone please regulate these people before we have to go running to the Chinese for even more money to bail them—or what’s left of us—out?
Let’s just summarize this: Rich people have found a way to gamble on how long financially desperate people will live. We are living in a Philip K. Dick novel. —PS