The Wall Street financiers crapped out on their sub-prime gambles, inflicting economic devastation on the taxpayers who generously bailed-them out in return. Now, they need a new gamble, a new game in which they bet using other people’s money while skimming off the cream for themselves until it all collapses.
The new game? Betting on when people will die.
It works like this:
The bankers plan to buy ‘life settlements,’ life insurance policies that ill and elderly people sell for cash â€” $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.
It’s pretty similar to what happened with the sub-prime market. Bankers put the dodgy mortgages they had lent to poor people to buy over-priced houses together in packages (CDOs), which investors bought getting the payments from those mortgages as the return on their investment. Of course, as we now know, the financiers on all sides over-valued the CDOs because they were basically betting the housing boom would continue forever. When the mortgage payments started to dry up, thanks at least in part to the rising price of oil, the value of the CDOs collapsed and so would have the financial system without government bailouts.
But this new sub-prime disaster in waiting has a nasty twist:
The earlier the policyholder dies, the bigger the return
It’s a good time to be making that bet now in the US. People are losing their jobs and their health insurance. Poverty is rising and, with it, health is declining. People need cash, especially if a health problem hits the family (health problems are the most common cause of bankruptcy in the US). The Wall Street vampires offer a rip-off price for life insurance policies and wait for rising poverty to fill their coffers. There are predictions the market for these death-bets will grow to $500 billion, approaching the size of the sub-prime market at its peak.
Of course, that gives the investors a big reason to oppose health reform. Better health-care would see them take a bath on their death-bets (the money-men in the middle make their fees either way). Now, we see another reason why the big money that hides behind the screaming hicks at the town-hall meetings is so keen to stop universal health-care in the US.
And what happens when this bubble bursts? What happens when health reform and/or an improving economy improves people’s life expectancies and the Wall Street vampires find there’s not as much blood to suck as they bet on? Another collapse? Another round of bail-outs?
Isn’t it time to radically reform this dysfunctional capitalist system? With its unethical, short-term fixation on money, doesn’t it create more ill than good?
Can’t we do better?
[hat-tip eXiled Online]