Thursday, September 10, 2009

The Big Casino

I thought I’d heard it all when I first read of Wal-Mart taking out life insurance policies on employees, a despicable practice now largely illegal. The policies were privately called “dead peasant’s insurance.” They’re life insurance policies that companies like Wal-Mart take out on employees if and when the employee is killed on the job, say, and the company and not the employee’s family, is the sole beneficiary and reaps the rewards. Not so oddly, Wal-Mart’s lawsuits against the insurers who’d sold them these claims on the grounds that they did not warn them of the tax risks involved were recently reinstated by the Delaware State Supreme Court. Wal-Mart, as with virtually all corporations, has papers of incorporation filed in Delaware. Essentially, we’re seeing one financial giant trying to screw another one over who gets to reap the payouts of employees who make little more than minimum wage.

Then from Greg Palast I heard about vulture fund managers who buy up national debts at a greatly reduced rate then pervert these IMF and World Bank solutions to alleviate Third World nations of their debt by then taking them to court and suing them for the full amount of the debt. And you would think that bloated scumbags like Michael Sheehan and Paul Singer, for deliberately bankrupting Third World nations who’d earmarked that extra revenue for educational and AIDs prevention programs, would represent the very bottom of the barrel.

However, pure human evil always has the resourcefulness to surprise even the most cynical and jaded, to spelunk to new levels of moral putrescence. Just when you think you’re heard the ultimate in corporate sociopathic greed, you read about something like this.

A reader today sent me a link to a story on Alternet that, believe it or not, completely blows out of the water the inherent evil of companies such as Wal-Mart buying “dead peasant” insurance policies on low-wage employees often without their knowledge. Mark Ames wrote a hyperventilating but still-frightening story today about a giant casino that spans all of Wall Street and the next big bonanza on the horizon is betting on when the terminally ill and elderly will die. And in the years to come the payout could run in the trillions.

As his primary source, Ames links to a story that came out 5 days ago in the New York Times. This is how the scam works and it’s all perfectly legal:

Certain Wall Street firms are planning on buying up hundreds of thousands of life insurance policies at greatly reduced rates (much like the vulture fundies) from the elderly and terminally ill. With skyrocketing US health care costs already the highest in the world, many sick people would be visited at the side of their deathbeds vulnerable to pitches from corporate shills who wave money in front of their faces. Since people have had to sell their homes just to pay their health care costs, they sign away their life insurance so it can then get shoveled back into the bottomless coffers of HMO’s and they’re lucky if they have enough left over for something better than a Potter’s Field funeral.

These life insurance policies are then bundled together by the thousands into bonds. Then the new policy holder continues paying the premiums on the life insurance until the original policyholder dies. What this means, essentially, is that the sooner the patient dies, the more money the new policyholder makes. The longer it takes the patient to die, the more money they stand to lose.

This is despicable enough as it is but there are two corollary issues that need to be addressed before we can assign to this scam the full-throated loathing that it truly deserves. This practice within a $26 trillion industry could actually increase premiums for those who already own or are about to buy life insurance policies if these Wall Street bloodsuckers make enough money from the payouts. This would contribute to present and future policyholders not being able to afford to insure their lives and protect their families.

The second and more despicable issue is that those who are pressing for this last Great Frontier of Profiteering are also the same ones who are trying to prevent any kind of meaningful health care reform bill from being passed. Health care reform, even the watery, co-opted boondoggle that we’ll surely be saddled with and forced to sign on to, could still theoretically mean longer lifespans.

And this new generation of vulture fundies absolutely does not want that. They want us to die as soon as possible after they grab our policies for pennies on the dollar. And when, not if, when they succeed in killing any meaningful health care reform, next in their crosshairs will be Obama’s proposed Consumer Financial Protection Agency, which would be put in place to keep these monsters’ hands off our life insurance policies.

Among those who are pushing the hardest for this bonanza (that’s been euphemistically renamed “life settlements” and the practice called “securitization”) is the “nonpartisan” US Chamber of Commerce, which, square inch for square inch, harbors more pure, unadulterated, condensed evil anywhere in the galaxy outside of Dick Cheney’s heart. The CoC is led by a crook named Thomas Donohue, who is described by Ames thusly:
The head of the Chamber, Thomas Donohue, is the perfect man to play the role of Dracula's Assistant: his resume includes serving on the board of directors at Qwest during the period when Qwest was accused of one of the worst fraud scandals in corporate history, resulting in billions in overstated revenues, and criminal and civil charges against the CEO (who was sentenced to 10 years in prison) and eight others; the board of directors of Union Pacific Corp, when as head of the compensation committee Donohue approved some of the highest CEO compensation packages in history, including tens of millions to former CEO Richard Davidson, along with his $2.7 million annual pension when he retired in 2006; the board of directors of XM Radio, which is currently almost bankrupt and facing delisting; and the board of directors of a nursing home monolith, Sunrise Senior Living, which is being investigated by the SEC for fraud, and which today faces possible bankruptcy. (Not surprisingly, one of Donohue's longest-running goal is to protect billionaires from lawsuits.)

Bottom line: Everywhere Donohue has been, scandal, fraud, lawsuits and bankruptcies are left in his wake, the perfect embodiment of the scorched earth, rabidly tort reform movement that has further enriched billionaires and have plunged millions into debt, bankruptcy, homelessness and unemployment. In other words, Tom Donahue is to American Big Business what Bill Donohue is to American Catholics.

Donahue’s Chamber had recently launched a two million dollar campaign to Hindenburg Obama’s CFPA before it even clears the mooring ropes. Doing so is what’s known in financial circles and elsewhere as “hedging your bets.”

So there we are. We’re finally seeing the realization of Soylent Green and The Matrix, in which the dead were freeze-dried or liquified to feed the living. Wall Street is eagerly lining up to bet on our deaths and flock to our hospice bedsides hoping to buy up our life insurance policies for pennies on the dollar and hoping that we croak before they have to be burdened with paying our premiums for too long.

And the effort is being spearheaded by the very same robber barons (such as Goldman Sachs) who’ve benefited from trillions in taxpayer handouts that we didn’t voluntarily hand out. We paid Wall Street trillions so we could help them make trillions more on our deaths to cover the money they lost due to their heartless, reckless greed in the first place.

The New York Times got the ball rolling and started a very necessary dialogue about this. So why isn’t this getting more airtime or more play in the blogosphere?


At September 10, 2009 at 1:06 PM, Blogger nunya said...

Great, another financial bubble, this one more cynical and morbid than most.

Fuckin' Fed.


At September 10, 2009 at 1:51 PM, Blogger Cossack said...


Most excellent comment...and dead on!

At September 11, 2009 at 12:33 AM, Blogger William N. Grigg said...

Thanks for writing about this gruesome and utterly revolting permutation of the corporate state.

America is rapidly becoming a thanatocracy, ruled by an oligarchy that murders foreigners en masse and profits from the death of the most vulnerable here at home.

At September 11, 2009 at 2:08 AM, Blogger Bukko_in_Australia said...

The whole deal sounds like a "fuffle."

For those who don't read the link (which is from Dmitry Orlov, an ex-Soviwt who has a blog that's all about predicting the impending collapse of the US):

A fuffle is an artful fake, an artifact specifically made to fool, beguile, seduce, or intimidate people into paying for it. Ideally, the initial transaction serves as the basis of a permanent arrangement, with the victim roped into an installment plan, which keeps the payments flowing even after the fuffle itself has crumbled into a pile of dust.

These "betting on death" deals have been around for years. The old word for them was "viatical" investments. (Google the word if you want to learn more about the definition.) It used to be a one-by-one thing, bit now they're bundling and securitising them. This is a fuffle on several levels.

One os for the poor schmoes who buy the insurance policies and pay on them loyally, month after month, betting on their own mortality. The next is for the vultures who buy the "securities," thinking they're going to profit. Heh-heh, so did the people who bought mortgage-backed securities. That blew up in plenty of peoples' faces, didn't it? And when this does the same, the suckers who fell for the fuffle securities will get the burning they richly deserve, for expecting to make money from death.

The only people who actually do well from this crap are the shyster middlemen who organise the schemes and cream off fees from setting them up. It's all a load of flim-flam, but that's the basis of so much of the Western world's economy now. Eventually, the paper dollars they're all chasing will be meaningless pieces of paper and electrons on a glowing tube, while outside the glass offices, people scavenge for scraps to eat and try to kill anyone who looks like they might have something worth stealing.

You asked on Teh Gen'l's site why I don't comment on your blog much any more? It's not because you write less well or analyse things less cogently. It's just that I'm spending more time reading econoblogs these days. Politics seems like a sham. There's lots of back-and-forth bickering between buffoons, but it's all arguments over who took whose deck chair as the Titanic listed to port. It's all going down, and I find it most interesting to follow the hard numbers to plot the trajectory of the descent, and try to figure out the best way to deploy my parachute.

At September 11, 2009 at 2:34 AM, Blogger Bukko_in_Australia said...

One more thing, in light of your financial situation, since I'm blog-whoring Orlov: Would you like to buy some hunger insurance?

At September 11, 2009 at 8:30 AM, Blogger Glen Tomkins said...

A further refinement

The scheme presented is only maybe halfway to full evil. Let me add a refinement to try to bring it to full monty evil.

Okay, so you buy up the policies of all these geezers, but you concentrate on the ones who aren't really near death's door ill yet, because you'll get their policies really cheap. Then you invite them all on a free Caribbean cruise, and arrange to have an al Qaeda submarine torpedo the cruise ship. It goes without saying that you've insured the cruise ship as well. The only added expense I see here, is that to get the full benefit, the submarine has to surface after it sinks the cruise ship, in order to machine-gun any survivors. You may have to pay extra to get terrorists who won't have any qualms about doing that. Fortunately, recent history shows that won't be a problem with your own upper level managers.

Not only do you improve enormously on the profits you would have had to accept if you had waited meekly for nature to take its course with your victims, now you've got a fresh juicy terrorist incident to exploit. It could be like 9/11 all over again, and we saw what a huge bonanza that was for folks willing to cash in on fear and panic. You've got to think big, and killing one lousy cruise ship full of profit on the hoof is just the jumping off point.

Of course the idea has wider application. Say you're a health insurance plan, and under Obamacare you're having trouble getting rid of beneficiaries who are so unpatriotic as to get sick and generate claims. Just invite them on a Princess cruise to profitability, and pretty soon they won't be a drag on your bottom line any longer. Arrange the cruise as compassionate outreach to the sick, something like Ronald McDonald houses, and you get massive PR cred for good corporate citizenship, etc..

At September 11, 2009 at 11:29 AM, Anonymous Mike the Mad Biologist said...

Well, JP, I tried. I'm looking forward to the derivatives market in cadavers, myself...

At September 11, 2009 at 11:48 AM, Anonymous justintime said...

"certain Wall Street firms"


At September 11, 2009 at 12:43 PM, Blogger jurassicpork said...

As I said in the penultimate paragraph, Goldman Sachs, for starters. The others don't want to be known, I guess, until someone opens the gates to start the stampede.


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