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Wall Street's death wish

Investing in mortality; plus, getting it right, and wireless, in West Virginia
By PHILLIPE AND JORGE  |  September 9, 2009

If you read the front page of the September 6 New York Times, P+J hope you are either dumbfounded, appalled, frightened, or so pissed off that you went and got the Uzi from the attic and looked for the Amtrak schedule for the Northeast Corridor trains running to New York City and Washington, DC. At least it shows you are paying attention.

The gray lady of journalism reported on Wall Street's latest money-making scheme, the sequel to the subprime mortgage fiasco that has brought us the greatest economic depression since the days of silent film. And if nitwit Sarah "Iquitarod" Palin and the fat white boy GOP Big Biz whores want to talk about "death panels," perhaps here is the place to focus on:

The [investment bankers] plan to buy "life settlements," life insurance policies that ill and elderly people sell for cash — $400,000 on a $1 million policy, say, depending upon 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 or subsequently trading them.

That bundling sound familiar, kids? Dow Jones, meet Dr. Jack Kevorkian. We believe this could be the beginning of a wonderful friendship. Or, as one Gordon Gecko/Bernie Madoff-esque anonymous investment banker told the Times, "We're hoping to get a herd stampeding after the first offering." Yep, investors naive and obedient as a passel of dumb animals.

To add to this ghoulish approach to greed, there are other wonderful aspects to the new death wish scheme. Insurers may have to raise their premiums in case too many people have the unmitigated gall and rudeness to live too long. The industry regulators supposedly overseeing the insurance industry have already been "plagued by fraud complaints" and "have criticized life settlement brokers for coercing the ill and elderly to take out policies with the sole purpose of selling them back to the brokers, called 'stranger-owned life insurance.' " Insurance regulators from some states have already warned Congress that "regulation was inadequate." And the people investigating how to manage the risk of these deals are once again "mathematical whizzes"— the same number-benders who proved on paper with indecipherable formulas that you couldn't possible lose your entire life savings or house on bad subprime mortgage investments. Hit that nail right on the head, didn't they?

All you really need to know about this whole new financial scam is that a spokesman for Goldman Sachs refused to comment on the Times story. Nuf sed.

Meanwhile, P+J recommend their own investment should this morbid racket succeed: purple Kool Aid. Old folks love it. Or we'll damn well teach them to.

Bend over once again, America. And don't let your local investment banker go to bed hungry. Congress won't.


The Urinal's intrepid reporter and Casa Diablo charter member Tom Morgan alerts Phillipe and Jorge to a September 2 Associated Press report on a Bank of America office in Tampa, Florida, to which we must all give the finger.

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