Sunday, September 6, 2009

The Scammers Are Back! Count Your Fingers!

There is a most interesting article in today's New York Times. Wall Street Bankers are up to their old tricks. Remember how the health insurance industry health insurance reform by worrying the world that Dreaded Death Panels would be created to kill off poor sick Gramma because she too sick and old to be worthy of health care? Well Wall Street Gambling Interests are putting together a new security, or a new ponzi scheme if you wish. This one also involves your grandmother, she was so useful to them with health care, they figure that they will bring the dear old lady back for an encore. Basically Wall Street wants to buy Gramma's life insurance policy for some small premium over it's surrender value. Surrender Value is what an insurance company will willingly pay to the owner of the a policy to get off the hook so that if Gramma dies they won't have to pay out any money to the beneficiaries. Enter the WSBs. They go to Gramma say if you sell your policy back to the life insurance right now they will you say $400,000 for the policy, if Gramma doesn't sell her policy back to the insurance company and she dies the insurance company will have to pay the face value of the policy, say one million dollars to the named beneficiaries. Now if Gramma needs the money that can be a tempting offer. If the WSBs say offer her $500,000 for the same policy, that is an even greater and sweeter temptation to poor old Gramma. Let's say she accepts the offer and now has a half million dollars to squirrel away somewhere and to pay her expenses with. The WSBs leap with joy because they pay the premiums now and keep the policy in force. If Gramma had sold the policy back to the life insurance company it would no longer be in force. The WSBs now gather up bunches of these policies they have purchased and "securitize" them. You have heard this term's what the WSBs did with mortgages of the past several years during the real estate "boom". "Securitize" simply means they turn Gramma's life policy into a security and start selling interests in the policy and promise high returns to people who buy interests in these securities. These interests are generally in the form of fractional interests in the policies underlying these securities. WSBs now have an interest in poor Gramma dying off quickly because when she dies they get the payout less whatever is owed to the investors in the way of interest payouts is theirs to keep. WSBs now have will have an interest in how long dear old Gramma lives. She want her to die quickly, the quicker the better for them. They are marketing your grandmother to the world and betting she dies sooner than later.

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