A few days ago, the NY Times ran a story about the latest bright idea from Wall Street:
The bankers plan to buy "life settlements," life insurance policies that ill and elderly people sell for cash -- $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to "securitize" these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
Basically, it's the same thing that Wall Street applied to risky mortgages, and that worked out so well. This time, however, the key variable is not the likelihood of people repaying their mortgages, but rather their lifespan: "The earlier the policyholder dies, the bigger the return -- though if people live longer than expected, investors could get poor returns or even lose money."
Is it unreasonable to worry that death panels will have new fans if these bonds become as popular as the mortgage backed securities were? And will Wall Street cease to invest in advances in medicine that prolong life. Or perhaps the backers of these bonds are already banking that those very things will be the inevitable result of moves currently being made in Washington.