Halloween is still a month away, but ghouls, ghosts, and other grotesque creatures are already roaming America’s streets. What makes them so horrifying is that they are the newly issued spawn of — shriek! — Wall Street.
The new scheme is based on the mundane (but huge) life insurance market, which Wall Street intends to exploit through a financial mechanism called “life settlements.” Often in need of cash, the ill and elderly can turn to a small network of brokers who’ll provide cash now in exchange for being named the beneficiary of the recipient’s life insurance policy. A broker might pay $400,000 for a million-dollar policy.
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Wall Streeters intend to set up extensive networks of these brokers to entice sick and old folks into settlements with such come-ons as these: “Cash-in BEFORE You Die!” “You CAN Cheat Death!” Next, Wall Street banks will package thousands of these settlements into bonds that they’ll then sell to big investors around the globe. As a result, when Uncle Bob croaks in Dubuque, some speculator in Dubai will collect Bob’s life insurance payout.
This is exhilarating for the investing elite, but it will be a downer for life insurance customers, for it means that the price of policies will go up. Insurance companies base their price on the calculation that many policyholders pay premiums for years, but then cancel their policies before they die – thus, the insurer pays out nothing. Now, though some faraway, third-party investor will keep the policy in force until the former policyholder dies. To cover these unanticipated payouts, the companies will jack up life insurance prices.
Once again, Wall Street is turning a pedestrian consumer product into a global casino game. Consumers lose while speculators gain from exploiting other people’s hardships, eventually reaping profits from their deaths.
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