Monday, September 21, 2009

What the Hell are Life Settlement Bonds?

Now this is an interesting article talking about how Goldman and Credit Suisse are talking about creating something called Life Settlement Bonds and how they will be a bad deal for the $26 trillion (yes that is trillion with a T) Life Insurance Market.

But the owner of your life-insurance policy will pay monthly premiums and see no return until you die. The faster you die, the more money they make--that's not a healthy relationship to have with a multinational banking conglomerate or with the anonymous hedge fund manager who winds up buying these portfolios. I'm not saying these people will kill for money, just that ... no wait, I am kind of saying that. The person selling the life-settlement contract could make an offer along these lines: "We'll give you a bigger payout if you sign a living will requesting no heroic treatment if you're about to go on life support..." They will bribe people to go gently into that good night.

Ugh, this just gave me the odious thought on a way for ObamaCare to pay for itself and reduce the growth of future entitlements. If people were paid a lump sum to sign a living will so that Goldman can make money off of their Life Settlement Bonds (that security sounds creepy by itself) then there will be no need to spend that 30% of Medicare that is used in the last year of that persons life. If you see Rahms brother pushing these things then watch out.

Lucky thing is that Goldman doesn't seem to want to go to these lengths to tap another weird corner of the market. But $26 tillion is one big number so who knows what will happen in the future:

Through a spokesman, Goldman Sachs says it has no plans to directly securitize life insurance settlements, though it does maintain a (so far thinly traded) index of such securities and has a minority stake in Institutional Life Services, a clearing house and market place for life settlements.

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