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.
Full Article and Source:
Wall Street Pursues Profit in Bundles of Life Insurance
So what else is new on Wall Street?
ReplyDeleteS-O-S!
It just amazes me what schemes they think of to make money.
ReplyDeleteAnd now they're counting on people dying young for more profits. OK, that's a gamble -- unless they enlist doctors or promote assisted suicide.
Yes, just when the economy seems to be turning, we get this bit of bad news - ugh.
ReplyDelete"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."
ReplyDeleteI have read some disturbing news in my lifetime. This is more than disturbing, it is downright morbid and wrong.
It seems there are many more each day who are plain lazy and want to make easy money off the old folks.
And, to think we, the chumps, the taxpayers bailed out these greedy vultures so they could come back stronger and more disgusting than ever.
I don't quite understand this although it seems to be spelling out in simple terms.
ReplyDeleteIll and elderly people would take these settlements out to finance their remaining years?
Wall Street is always looking for a quick profit and they'll cash in on anything.
ReplyDelete