Tuesday, September 08, 2009
But, it turns out that Wall Street is considering a new form of securitization that will encourage investors to resist any measures that would result in improved health and longer life:
And, the size of this market for securitization is potentially enormous:
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.
For all the nauseating details, please consider reading the Times article about it in its entirety. Rarely have I encountered something so distateful, so revolting, described in such antiseptic detail.
Not all policyholders would be interested in selling their policies, of course. And investors are not interested in healthy people’s policies because they would have to pay those premiums for too long, reducing profits on the investment.
But even if a small fraction of policy holders do sell them, some in the industry predict the market could reach $500 billion. That would help Wall Street offset the loss of revenue from the collapse of the United States residential mortgage securities market, to $169 billion so far this year from a peak of $941 billion in 2005, according to Dealogic, a firm that tracks financial data.
Susie Madrak had the same reaction that I did when I read the article: why would brokerage houses and investors want health care reform when it would eliminate such a great opportunity to make money? After all, the earlier that people die, the more money that they will make. It goes much further, however, than health care reform. There are already rumblings that there is going to be a bipartisan effort to reduce Social Security and Medicare benefits as a means of reducing the federal deficit. Indeed, the ideological foundation for such an effort has already been laid.
Through the creation of this market, and the profits, transaction fees and bonuses associated with it, we will be creating a powerful economic interest for reducing the life span of many Americans. It goes far beyond Social Security and Medicare, as one is only limited by one's imagination as to means by which this can be done. Putting people in prison shortens their lives? Criminalize as many things as possible. A lot of people use oil and gas for heat in the winter? Make it so expensive that people are forced to choose between food, shelter, clothing and warmth. In other words, increase emotional and physiological stress so much so that it invariably results in shorter lives.
Sound paranoid? Not if you look back and see how the government allowed mortgage brokers, brokerage houses, banks and investors to dismantle the regulatory apparatus that might have prevented the housing bubble. Not if you look back and discover the extent to which the Federal Reserve facilitated the bubble with cheap money. With the securitization of life settlements, the door is open to a remorseless Social Darwinism not seen in this country since the late 19th Century.
Hence, late stage capitalism becomes overtly cannibalistic, moving beyond the dismantling of the social welfare state, and the short term profits associated with privatization, to the inducement of premature death, and the abandoment of one of its most cherished myths, that capitalism is the most ideal system for long life and personal fulfillment. Misery is becoming a necessary precondition for the ongoing operation of the perpetual motion machine known as the world of finance capital.