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In 2009, shortly after Wall Street imploded the global economy, I can only imagine some quants and greedy guys sitting around the board room table scratching their heads on how they could come up with the next ponzie derivatives scheme.  e.  

I wrote about this back then:

STOP THEM:  Wall Street to Bundle Life Insurance Policies

No one stopped Wall Street in 2009.  We must all remember that everyone on earth depends on a Happy, Cash infused Wall Street.

I think we could all get rich quick if we knew we would only have to pay a fine if we got caught.   Isn't that how the Justice Department works now? (Moyers/Taibbi video)

Actually, maybe Wall Street banks heard about this Waco, Texas business success in averting the law and making gargantuan profits for very little work.  Just the kind of product the banksters would love!

Well, apparently Life Settlements have been around before 2009; however, here's the problem for investors:

In the summer of 2005, a firm called Life Partners Holdings Inc. LPHI +0.37% said Marvin Aslett, an Idaho rancher 79 years old, had two to four years to live.

Charlie Litchfield for The Wall Street Journa
Marvin Aslett, 84, has outlived a longevity estimate given to investors in his life insurance by Life Partners.

It didn't make this estimate on his behalf but for its customers. The company arranges to buy life-insurance policies from people like Mr. Aslett and sells fractional interests to investors, who collect the death benefits when the insured people die.

The investors in a $2 million policy on Mr. Aslett's life would have made a tidy return had he died as projected. But more than five years later, the rancher, now 84, says he runs on a treadmill, lifts weights and chops wood, adding that all of his grandparents lived well into their 90s.

"I'm healthy as a horse," he says. "There's going to be a lot of disappointed investors."

There's another problem:  Greed - This is greed on steroids
Life Partners acquired the $1 million policy on behalf of its clients, paying $300,000, according to company filings in Texas.

It brokered the policy to the clients the same day for more than $492,000 plus five years of future premiums, an additional $58,000.

This spread is lower than typical. Mr. Pardo agreed with Journal estimates that on average, Life Partners sells a policy for about 2.4 times what the owner is paid, much of which goes to its own fees. In its most recent fiscal year, the firm reported receiving an average of $308,000 in fees from 201 policies sold.

PER POLICY!!!

And I will bet dollars for donuts that the older person that accepted an early Life Settlement payout didn't get their check until AFTER Life Partners got paid.

This is like pulling money out of a hat.

Let's start one, K?  I'll buy your $1Million life insurance policy for 1/3 of what it is worth but I won't pay you out until I sell your policy to someone else for more than 1/2 of what it's worth.

"What?  What's that you ask?"

"NOooooooo, I would never be tempted to knock you off so I could get my $1,000,000 pay off sooner.  What a silly question!"

Well, it looks like lots of Wall Street players jumped right into this great cash flow business and found lots of willing investors to BET ON YOUR LIFE!

AIG loved the idea. Yes, the AIG we bailed out.  And AIG paid us back by betting on WHEN YOU WILL DIE!

In 2009, AIG issued $8.4 billion worth of life settlement bonds to repay the $1.2 billion bailout loan it received from the Federal governments.
So why is it that, all of sudden after the Great $Multi-Trillion Mortgage Heist, Wall Street is so enamored by the prospect of securitizing life insurance polices?
The answer, quite simply, is that for both institutional and private investors alike, the recession has created a need for uncorrelated products. Life insurance is not only independent of the whims of the economy, but represents $26 trillion in untapped resources.
I love Google.  Who would have EVER guessed this scheme is patented!

At this link, you will find a list of patent #s, the name(s) of the creators, the patent filing dates, issue date, and Original Assignee.

Disclosed are novel capital market products, e.g. bonds, equities and like, employing a life settlement policy pool as collateral against repayment of principal.

Here's a LIFE SETTLEMENT PATENT by JP MORGAN CHASE, 2007

JP Morgan Patent to Bet on our lives

I clicked on the first name listed:  Guy D. Couglan and found this:

ABSTRACT

The invention (I GUESS YOU CAN'T USE THE PHRASE PONZI SCHEME, INSERT MINE) comprises a system and method for hedging or mitigating mortality exposure risk in a portfolio of mortality-dependent instruments. (YOUR LIFE INSURANCE POLICY/YOUR LIFE, INSERT MINE)

A mortality risk or longevity risk of the portfolio is calculated or otherwise determined.

Then the sensitivity of the portfolio to mortality risk or longevity risk is calculated or otherwise determined, in other words, how much is cost or value of the portfolio affected by a change in mortality rate.

To account for that mortality exposure, a selection is made of building block mortality derivatives that include age-based mortality derivatives.

The selected plurality of building block mortality derivatives are used to create a hedge against the mortality risk or longevity risk of the portfolio.

GOT THAT!  Wait.  Is JP Morgan Chase providing hedges to others' portfolios?  Is JP Morgan the new AIG?  Who can keep all this confusion straight, anyone?

Perhaps I have an overactive imagination, but I can almost bet that Hurricane Sandy might of helped some of these investors recoup their investors.

THE SOONER YOU DIE, THE MORE THE INVESTOR WILL EARN.  What could possibly go wrong?

I have to stop tonight.  I am too disgusted to continue.

To summarize:

People pay on big life insurance polices their entire lives.  When they get old they have an option to sell the policy for a fraction of the value.  Then Banksters and a host of smaller players get to trade your life insurance policy like kids trade baseball cards.

That must make the elderly feel secure.

OH WAIT!!!!

2011 - SEC Charges Offshore Company in Massive Life Settlement Bonding Fraud

I wonder if there will EVER be a conviction?  Jail time?

Of course!  These are small fries.

Life settlement bond seller gets 60-year sentence for $485M scam

From 2004 to 2010, PCI sold almost $500 million in guarantee bonds to life settlement firms, which buy life insurance policies from insured people at less than face value and collect benefits when the insured die. The bonds were sold based on fake financial statements that included false claims about contracts with major reinsurance companies.
Scoff!  $500 million is chump change.

Remember what was reported above:

Life insurance is not only independent of the whims of the economy (or natural disaster I might add), but represents $26 trillion in untapped resources.

Go Wall Street!

USA Exceptionalism

This is worse than the mortgage scheme, imo.  I hope all the older people in this country tell these vultures to pound sand!

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