A Cheery Holiday Message from Bankster: Death Eaters on Wall Street

Submitted by Mary Bottari on

Today's Wall Street Journal has a stunning exposé on a publicly-traded company called Life Partners Holdings. Are you ready for this? Life Partners creeps around asking the unemployed, the elderly and the sick (especially people with HIV/AIDS) to sell them their life insurance policies for cash. Then they bundle these policies into securities and sell them to vultures -- oh, I am sorry, "investors." Then the "investors" sit around and wait for people to die -- the sooner the better for the purchasers of these death bonds. The future of this industry "looks bright," chirps National Underwriters.

Reminds you a little of those Death Eaters in Harry Potter, doesn't it?

Of course the "life settlements industry" would not be possible with out the financing and backing of big Wall Street banks, the triple-A rating from Wall Street credit agencies and, of course, the quality work of the "big four" accounting firms. The recently-indicted Ernst and Young cooks the books for Life Partners.

Last year BanksterUSA targeted Goldman Sachs' financing of this emerging industry. This year, Goldman shut down Longmore Capital, its death bonds subsidiary, and withdrew from the market.

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Banking
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Mary Bottari
Mary Bottari

Mary Bottari is a reporter for the Center for Media and Democracy (CMD). She helped launch CMD's award-winning ALEC Exposed investigation and is a two-time recipient of the Sidney Prize for public interest journalism from the Sidney Hillman Foundation.

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Comments

Pootersox replied on

While I am sure there are abuses in the "we'll buy your life insurance policy" business, such businesses were literal lifelines for people with AIDS who did not know how they could afford to live until they died. It was a huge benefit to such folks to have cash in hand to pay for medications, treatments, and even the roof over their heads and the food in their mouths. My brother did not have a life insurance policy. He chose not to take his medications so that he'd die faster, rather than depend on my dad and me to support him. I'd have had my brother a lot longer had he been able to sell his policy. I do not agree w/ you on the "ethics" of this approach!

rkirkr replied on

Don't you just love this FOXNEWS style of slanted reporting. Providing liquidity for legal, illiquid assets for willing sellers is in no way evil. Securitization of these assets provides a real reinsurance market service by mitigating real risks. BTW, Goldman's decision had absolutely nothing to do with BanksterUSA. The reality is that proper securitization requires time and specialized expertise. The ramp up just took too long in an industry in the middle of a financial crisis of it's own. Besides the life settlements industry is too small and have overpaid for policies. So these "vultures" are losing money and these poor dying souls are living longer and making money. Reason enough. This story's assertions and conclusions would make O'Reilly proud.

Anonymous replied on

good post Mary! This is but one example of predatory capitalism. Of all the "developed" nations on planet earth- the USA has the highest death rate and morbidity rate because of its "free market" capitalist system- when I was growing up during the Cold War, we were brain-washed by our side into believing that communism was evil and capitalism was best. As 2011 approaches, it appears that capitalism has finally conquered the world. The moneyed elite of the world prosper, while the vast majority of the world's people are prey to these carrion eating vultures.

L Leslie replied on

While I sympathize with the point of this post, creating a re-market for life insurance policies does seem like it could be a way to enable people to liquify one of their least liquid assets at the time when they most need the money. Obviously, this is an area which could become ripe with abuse and exploitation, but if strictly and carefully regulated, allowing the policyholder to use the funds they have paid in rather than reserve it for their heirs seems like an excellent idea. People may pay in for years while they have dependent children, but if they then need that money for their own care later in life, having a secondary market to provide this liquidity may very well benefit the policyholder immensely. Thank you for bringing this shadow market to light, and I would be interested to know if your objections to the practice are based on an objection to the monetization of life inherent in life insurance in general or if there are specific abuses being propagated in this particular reinsurance field which are objectionable?

Ann replied on

Reading about life settlement companies that have been prosecuted, it's the individual private citizen investors in those companies, in essence the real buyers of the policies, who are often individuals looking to get a better return on their retirement investments, who are being exploited. They have often been promised returns that are not sustainable. As someone mentioned above, those with AIDS benefit greatly from life settlements. The industry was created in response to a need, back when the "AIDS cocktail" didn't exist. Life insurance policies now have clauses that allow 1/2 or more of the death benefit to be paid out to those with a terminal illness (without the insured losing ownership of the policy--the balance of the death benefit is still paid to the family/beneficiary), but life settlements generally are paid out earlier in the process of illness, or even to those who are not ill. The calculations are complex. There is plenty to expose in those who are exploiting investors, some of whom have lost their life savings, and to bring bad acting life settlement companies to justice. To paint a financial arrangment that is of benefit to those who need cash at end of life as a bad thing in and of itself seems to be a misunderstanding. Is the author against car loans, mortgages and insurance in general? Financial products can be structured fairly or abusively. It's the abusive practices that need to be brought to light, and proper enforcement of regulations, or creation of new ones that is important. I am sure most of the readers and supporters of this organization support credit unions and the idea of state owned banks. Financial institutions need to be regulated. There are many laws on the books in states that regulate the life settlement industry. Unfortunately, it seems that they have not been completely effective in getting rid of abuses. So it goes with financial regulation. Rational discourse about these matters seems to be a good way to win the broadest base of support for the causes promoted here. I join L Leslie above in asking what this organization believes about the monetization of life inherent in life insurance?

Anonymous replied on

I'm just so pleased to see thoughtful comments! Having no strong opinion on the issue myself, I just want to praise participants for showing that there's still people out there who can read, think, understand each other's points of view, and respond with civility. - just one more reason that CMD is worth my time.