Making the best of our recession

Financial ingenuity in hard times

2 minute read
Happy days are here again.
Happy days are here again.
Given the unemployment figures, would-be entrepreneurs might consider a new enterprise that could be a useful appendage to Wall Street's latest investment: the marketing of life settlement insurance policies.

A policy holder, in need of ready cash and unwilling to settle for the chump change that he would get in a cash surrender deal with the insurance company, sells his policy to a life settlement company at a higher figure, but an amount much smaller than the policy payoff when he dies. Even though the settlement company must pay the annual premiums for a set period, it stands to make a killing (an unfortunate choice of words) when the fatal day comes.

Banks like Credit Suisse have caught the scent of profit in the wind and have begun to bundle— that is, securitize— large numbers of policies to sell to investors. If the project turns into a disaster, the banks already will have got their share and unloaded their hot potato; and the bankers, even if they miscalculated as they did with home mortgages, will presumably get their bonuses, as the hesitancy about dealing with executive pay at the Group of 20 meeting in Pittsburgh suggests.

That leaves the investors as the possible losers, because they'll have to pick up the premiums if the person who sold his policy has the bad grace to survive beyond the estimated time frame.

That's where the new business opportunity comes in: a service company designed to remove tastefully the obstacles to investor income. All that's needed is a snappy title for such a business, perhaps one that I remember reading often in the pages of tabloids when I was a boy: Murder, Inc.♦

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