Wall Street To Securitize People’s Deaths?

The New York Times published a pretty creepy article on Saturday (September 5th). The article focuses on Wall Street’s new plan to make money. What’s so bad about Wall Street making money?

Well, their new plan is to buy life insurance plans from elderly and sick people for cash. The example that the New York Times gives is someone selling a million dollar policy for a $400,000 payout, but the payout amount would all depend on the seller’s life expectancy.

These “life settlements” would then be bundled together to form bonds that can be sold to investors. The investors would start paying for the person’s policy from then on.

When the person dies, the investors collect on the policy. Apparently, the faster the person dies, the more money the investors make.

However, regardless of whether you die sooner or later, Wall Street firms will profit off of fees collected from creating the bonds and facilitating transactions. You could say that Wall Street is planning to “securitize” people’s lives (or deaths, as it may be) into a kind of CDO. And we all know how great that whole CDO adventure played out for Wall Street, right?

What could be dangerous about creating a similar class of financial products with sick people’s life expectancy as the focus? Go to http://cbfe-econ.blogspot.com/2009/09/wall-street-to-securitize-peoples.html and read the rest of this story.