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Subprime Redux – Death Dealers

Wall Street never learns.

Despite causing one of the biggest financial crises in world history via the subprime debacle, Wall Street is back on the prowl like a serial murderer, and this time, its getting a lot more hideous. As the NY Times details in a story yesterday, Wall Street banks have whipped up a new plot that screams SUBPRIME MELTDOWN in a piercing, 120-decibel blast so shocking it leaves you gasping for breath as you try to figure out how low this class of humanity can go in its pursuit for fatter paychecks and super-padded bottom lines.


Bankers see a huge opportunity in the $26 trillion market that is represented by existing life insurance policies across the USA. If they can grab even five percent of this market, it represents over $1.3 trillion to be marketed to investors. The idea is to go to Grandma Jane and convince her to accept a deal whereby she will be paid to sell her $1M policy for a price greater than what the insurance broker would buy the policy back for. So if the broker is willing to pay only $60K, the banks might pay anywhere from $70K to $200K – depending on their assessments of how long she is likely to live. (The healthier she is, the less they’ll pay.) Lets say they pay $150K to Grandma Jones. She gets six-figures of cash in her bank account now that she can burn on whatever she wants. The bank walks away with the rights to the $1M payday for when she dies.

They turn around and resell that policy [which is now part of a mixed pool of other policies] at a X % markup, lets say 100% markup (securitization). The investor[s] pays $300K plus overhead costs needed to maintain the regular payments on that policy, as well as fees. If Grandma Jane dies four years later, the investors get a decent return – $1M, minus the original price and overhead.

The banks spread the risk out by mixing pools of life insurance policies that represent different levels of sick and elderly people. Some of them have cancer, others have leukemia, and yet others have a whole host of probable-terminal illnesses.

Banks and investors are getting rich off of people dying. I wonder which side of the health debate fence these guys will jump down on.

But that’s not all. The possibility of widespread abuse of such a scheme can lead to criminal negligibility causing death. Of not just one or two elderly or sick people, but millions. Enter the health insurance giants. They have a vested interest in denying coverage to certain of their health-care policy holders if they become direct or proxy institutional investors into this sickening cash grab. Already the HMOs and TPAs like Blue Cross Blue Shield, Aetna, Cigna, WellPoint, United, and many more have a full range of reasons why they have partial or full denials. “Out-of-network” or “medically unnecessary” or “lack of policy coverage” are just some of the whole host of excuses given by the insurance giants to deny health care charges.

If they have financial interests in the new sub-health mortgages, then they have a potential conflict of interest calculation to perform, and when the risk-reward ratio falls in favor of denying coverage and such denials result in worsening health leading to the death of a policy holder, then the insurance companies end up making billions whether the policy holders live or die.

Its no longer about just business, but rather it becomes a game worth of the giant Sin City casinos. The ultimate prize becomes higher and higher share prices as shareholders will find a way to get publicly held commercial insurers to invest in these intruments of death.

Some had rightly called subprime mortgages as the WMDs of the finance world. But that moniker is more appropriate for this troubling new mix of greed and murder.


Filed under: Current Affairs, Exhaust, NY Times, , , , ,

4 Responses

  1. Asmaa says:

    I just wanted to say that I don’t approve of your blog template.

  2. maverick007 says:

    oh noes! the dreamer has SPOKUNNNN!!!

  3. Asmaa says:

    Still don’t approve.

  4. maverick007 says:

    You drive a hard bargain, ma’am. For all the effort I make in adjusting the site to suit your taste, whats the payback?

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