More Innovation from Wall Street: Securitized Viaticals

[Joanne98]

The geniuses of Wall Street have decided that the next big thing is betting on death. Yes, Wall Street will be rooting for sick people to die right away, at least as soon as the dying sell them their life insurance policies. It’s the latest version of a Death Panel: it gives investors a reason to stop health care reform.

Here’s how it works. Sick people need money. Most folks have term policies that aren’t worth anything to them while they live. They can’t pay for health care with money that won’t be there until they die. So, they sell their policies to Wall Street firms for something less than the face value but a good bit more than nothing. Wall Street wizards package them into bonds.

They found a rating agency ready to assign them AAA ratings. Of course, DBRS, and its math whiz with a degree in nuclear physics, have figured out that one needs to diversify to spread the risk:

A bond made up of life settlements would ideally have policies from people with a range of diseases — leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet.

That’s right; diversity is the spice of Vulture Bonds.
Once rated, brokers have a new product to market, just like those collateralized mortgages that were so successful at pouring fees into the pockets of the rich. Then they wait like the Himalayan Vultures they are for the sick to die, as soon as possible, thank you. The earlier they die, the more money investors make. Heaven forbid people should linger for a long life, that would reduce their profits.

And just like with CMOs, investors don’t even have to own the bonds to bet on death:

Goldman Sachs has developed a tradable index of life settlements, enabling investors to bet on whether people will live longer than expected or die sooner than planned.

Does anyone think we should give those creeps an incentive to stop health care reform? When investors have a financial stake in people dying, they sure don’t want their subjects to have health care. Even more of the rich will have a reason to kill reform so people will die immediately. It even gives rich investors a reason to demand the right to euthanasia.

This is Wall Street's idea of innovation. Aren’t we lucky to have carrion birds roosting high on Wall Street? Aren’t they really worth the billions they take out of our pockets?

http://firedoglake.com/2009/09/06/more-innovation-from-wall-street-securitized-viaticals/

[barbtries]

1. this is actually happening?

i find it so...horrifying. this is sick.

[Hello_Kitty]

2. Just so everyone knows, this ISN'T about life insurance.

We already know how life insurance works. We know it's a form of gambling and we know that viatical settlements have been around for a while. The problem here is Wall Street securitizing life insurance policies like they did with subprime mortgages. The FDL post in the OP is spot-on with the ominous portents of this.

[HamdenRice]

3. This industry was once almost whiped out by AIDS drugs

Back when AIDS was a death sentence, many AIDS patients sold their life insurance policies to investors/gamblers.

Then the retroviral drugs appeared and all these people had normal life expectancies, and many of those companies went broke.