Cashing in on Death
With the economy in recovery after the big blow-up on Wall Street, one would think the market would be playing it safe and staying cool. Well, think again. The New York Times reports that Wall Street is bundling up debts and stamping them with approval. What’s their poison this time? Life insurance.
The New York Times weighs in on their tactics:
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.
We can’t believe Wall Street is acting so reckless. Their profits will only be short-lived before insurance companies wise up and begin raising premiums and adding loopholes to their policies. It seems quick payouts are their only concern. If there’s one thing we can learn from them, it’s to avoid greed and deception.
As if Wall Street couldn’t get any lower with deceptive tactics, they beat their own record. The Times article goes on to report that some financial institutions are repacking their debt securities into higher rated packages. This tactic is called re-remics (re-securitization of real estate mortgage investment conduits). We’re shaking our heads at these idiotic ways.
• Credit Suisse
• Goldman Sachs (of course)
Moral of the Story: Avoid complicated investments. Transparency is key. If there’s smoke, there’s fire. Investment firms are on a mission to get profit via whatever means necessary. Don’t join the madness.
The time for the federal government to intervene with stricter regulation and auditing practices was yesterday.
*Image courtesy of Steven Puetzer.
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