Banking on Death

Oh, goody. Looks like Wall Street might be creating its own death panels here shortly:

Meanwhile, everyone is very excited about the next big scheme:

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.

Cue the right-wing outrage in 3...2... - oh, wait, it's the Free Market, so it's totally okay. Even if our premiums soar because some Wall Street Wizurds think they're impoverished if their bonuses dip below several million a year, well, that's just the glory of capitalism right there!

As you can see, the Wizurds have learned nothing about risk, seeing as how taxpayers will make sure their stupidity and greed don't end up destroying the financial industry.

Better prepare yourselves for another massive bailout when this shit hits the fan.