Wall Street Pursues Profit in Bundles of Life Insurance - the Great New Leveraged Money-Cow

I was reading the New York Times today and saw this story: Back to Business - Wall Street Pursues Profit in Bundles of Life Insurance - Series - NYTimes.com: "Critics of life settlements believe “this defeats the idea of what life insurance is supposed to be,” said Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute, a trade group. “It’s not an investment product, a gambling product.”

The overall article caused my skin to literally crawl. Some things come immediately to mind. Purposely innocuous terms such as "life settlements" need clarification. It seems like "securitizing" will upset people even more. It is morally questionable and worthy of condemnation to bundle or pool completely unrelated policies taken out by people who do not know each other, people who wanted to protect beneficiaries against future loss based on their individual policy premium payments.

Here is an anology. You have ten horses you have taken care of for years. A cowboy has a lame horse. He comes to you, the rancher, and says: "My horse is lame, can you borrow me one, and, as insurance, that nice gelding, too, as I'se a got a couple high-stakes rodeos comin' round and needs a backup, too." The farmer thinks rodeos are just great and agrees, charging 15 dollars a week per horse, but says he does't want to read about his horse in some cockamamie bank holdup in Montana, either. Oh, and just leave your lame horse with me, I'll have her good as new in 2 months. The contractual parties agree that the rancher's horses cannot be temperorarily "subletted" to anybody else. The cowboy ends up using the one horse each weekend in calf-roping, rents the other one to his barrel-racing cousin on the rodeo tour and during the week hires the horses out as draught horses to a quarry. The vagabond entrpreneurs make 250 bucks a week, per horse. A month later the cowboy returns the horses, who are looking rather gaunt, pays 30 bucks for feed for his recovered horse, takes it and rides off, not troubled by what he did.

All semblance to the life settlement and CDO industry is purely unintentional. It would seem like a horse or a pile of premiums just lying there is just too irresistible to some people. At what point does someone blow the whistle?

Insurance corporations are involved in pooling risk with potential profit involved. These insurers are accepting premiums from individuals and it behooves (get it?) the insurers to reflect on the example they set if they use the premiums entrusted to them for synthetically depersonalizing and spreading risk against potential loss with a profit motive, rather than just assessing normal actuarial risk.

The mechanics are questionable. Using policy premiums to involve more intermediaries making front-end fees should be made a punishable offence and severely mandated against. If insuraers lack self-control, government regulation is warranted.

The problem is that premiums paid don't look like horses being dishonestly rented out at rodeos. In this modern IT age, why is that not possible, to introduce an "Old Paint" tag to prevent abuse of premiums.

There is a cloak of smoke covering up what is happening. Who in the world among us people who lead a normal workaday life can get their head around "collateralize" and "debt obligation" all in one product name. Shouldn't it be renamed: "A vehicle for intermediaries to earn substanital fees from originating and "securitizing" life insurances policies"?

These deals, so brazenly made to sound harmless by generic-sounding labels such as "collateralized debt obligations" (CDOs) appeared to the Wall Street investment firms to be, to use The Washington Post's phrasing (thank you, Jill Drew), a "surefire way to profit from the booming real estate market without much risk to their companies. They engaged in a kind of financial alchemy, creating a trillion-dollar chain of securities on the back of subprime mortgages and other loans, which were sold to investors in private offerings that no government regulator scrutinized."


The sub-prime loans tanking nationwide stripped back the opaque names given to these "derivatives" and reverse-hedge hocus-pocus. The smoke cleared in every part of country and caught them with their pants down, shrugging their shoulders and saying: "... but I never intended to actually poison the well, after all I only poured things in for a few seconds." Or: What exactly did happen to Hamlet, that only took a few seconds, too, right? The spirit and intention are longer in the making. Can the concentration of financial prowess be to some degree removed from Wall Street or London financial powerhouses or what-have-you given how what they do sometimes occurs unfairly on the backs of the workforce. At the expense of what are actually people who are not driven by the profit mantra alone? Most people just want a fair benefit from working honestly and creatively.

Mediterranean impressions

A poem in celebration of August

Cicadas whirring as day's heat fades to night
Flip-flop steps bounce off a beachside boardwalk

Ibizenco espresso machines have gone silent
Instead, salt wind and the beat of the waves

Frolicsome, family, friends saunter by sunchairs
Three-fifty a day or seven for two

But our bed is the sand, the curls left by Neptune
Our sport to cavort without care in the sea

Our glee ringing out with a splash and a dive
Our bodies revived in the aquamarine pool

Bike knees churn uphill, the wind not working
The sweat on our brow pouring down in the sun

Some tapas - an ¡Hola! - a cordial reply
Welcoming strangers who smile with their eyes

Romano, Italo, Tedesco, and gringos
On these shores we're all just amigos.

Selective indignation on a crooked field

Philippe Sands felt a rock in his shoe and couldn't let it go until he had interviewed enough people involved to be able to analyze and ultimately write a book about it. The title: Torture Team: Rumsfeld's Memo and the Betrayal of American Values. The conclusion an intelligent reader of his book can make is that state and military power was abused at multiple levels and on multiple fronts in how detainees captured after 9/11 in the fight against terrorism were treated in contravention/violation of Geneva Conventions. His interview here reveals the compelling arguments to be found in more detail in his book. This courageous British lawyer, married to an American and living in the US, wants all facts on the table so that due process can follow. The response, showing individual responsibility (as in doping in my previous blog in 2007) being taken by people who were in power needs to be heard. The Rices, Rumsfelds, Cheneys, Addingtons, Hayneses have a duty as former civil servants or professionals to consider how they acted in the long run and step forward in candor and a contrite spirit, come clean without a trace of spin or tactic. The appearance of Condoleeza Rice on YouTube this week was appalling. It has to end. www.pbs.org/moyers/journal/05092008/transcript2.html?print

EXCERPT #1:

PHILIPPE SANDS: The story's a simple one. Back in '71, '72, the British moved as the United States has done now, to aggressive techniques of interrogation. They used pretty much the same techniques: hooding, standing, humiliation, degradation. Five techniques, they were called. [...] They went up to court, actually, and they were ruled to be illegal, in 1978 by the European Court on Human Rights. But there was a bigger problem, even beyond their illegality, in my view. And that was this: That what the use of those techniques did was to really enrage part of the Catholic community, who felt that IRA detainees alleged to be terrorists, were being abused. And it turned people who were perhaps unhappy with the situation into being deeply and violently unhappy with the situation. And if you speak to British politicians who were involved in that period, and the British military, what they'll tell you is that there is a feeling that the use of those types of techniques extended the conflict.

INCONSISTENT STANDARDS or as my Dad once called it... SO MYOPIC

Where is a fair shake and a level playing field now? Are all detainees created equal in our acutely aware, globalized world, and are they endowed with certain inalienable rights?

Indignation on whose behalf? On behalf of IRA detainees held by the British. On behalf of a "fallen brother." Hmmm. Indignation at basely carried out cruelty. Which extended a very difficult stand-off by years and years. This is a classic double standard if there are constantly dark green and light green bus passengers (shackled "air-freight" detainees flown around like hocks of ham) as you throw principles under the bus.

DEBATE SQUELCHED or A SIN OF OMISSION

Who went silent on the gross injustices in American detention practices, so myopically rationalized by one congressman who brazenly said, without knowing, or caring(?), for the truth, that "3,000 Americans died," when the victims were in fact from 90 different countries. The pain was felt inside and outside the US. The most serious blow was to the rights of the common man and the common weal internationally. London was eventually hit, Madrid was too, and so were a series of other terrorist objectives elsewhere.

THREE MINUTES

 BILL MOYERS: Going back to the hearings, one member of the committee, Representative Trent Franks of Arizona, a Republican, said--and I quote--"The results of a total of three minutes of severe interrogations of three of the worst terrorists were of immeasurable benefit to the American people. A full 25 percent of the human intelligence we've received on Al-Qaeda came from just three minutes worth of rarely used interrogation tactics."
PHILIPPE SANDS: Well, I remember that very well. And I appreciated very much everything that Representative Franks had to say. But I've described that to my friends in London as a sort of Monty Python moment in the hearing. Because he alleged that there had been three individuals water boarded. They had been water boarded for no more than one minute each. And they had spilled the beans. And I was sitting there watching him and thinking, well, that's new information. I've never heard that before. Where on earth does that come from? Counterintuitively, I can't imagine how a water-boarding of one minute is suddenly going to produce useful information. We don't even know if it is useful. But also, imagine the scene. You've got guys there with stopwatches. We're gonna waterboard him for one minute, and then we will stop. And in that one minute, everything will come up. I don't know where he got all that from. I thought he sounded as though he made it up on the spot...

THE POISONED WELL
I scoffed at this, and fired back in emails, even in my own family, when the party claptrap line was served up. But nobody would talk, though some may have been lurking. There was a silence hanging like a cloud over family communication.One family member near to me stated: yes, you have to torture in circumstances which help your country. I was galled and sickened.

So many in general were hoodwinked and taken in by this pushy, arrogant, mean-spirited mentality, some spreading it themselves, most chomping down on it hook, line and sinker. And, still, a sizeable portion of the US population is not visibly, palpably upset over the crimes. At the same time those not willing to talk sacrificed part of their family's otherwise intact communication, squelching debate and left those bringing up the subject "out in the cold" with the light switched off, to ensure their own, albeit momentary, political, and by extension, tax and monetary gain, and just chime in, or emotionally check out, on the difficult issue.

IT ALL COMES OUT IN THE WASH
Now, as we are being thrust further into a severe economic crisis, as my landlord says, "the correct and incorrect ones become visible in hard times." This phrase can cut both ways and has to be applied with an eye to when one day you yourself are down. In weakness, as we all have our own special weaknesses, we are exposed, and when things are going well, the ones with self-serving, illegal and selectively indignant methodology can cover up their trail with equivocation and (self)rationalizations, but time eventually brings around the reverse set of circumstances and lays bare tracks and exposes motives, which can be ferreted out by those willing to dispassionately take notice, like the man who prompted this blog post: Philippe Sands.

CLOSING ARGUMENT
EXCERPT #3:
BILL MOYERS: Do you think that people like David Addington and John Yoo and Jim Haynes, and the other lawyers you've mentioned who advised and were on the torture team, should ultimately be held responsible in court for what they did in government at this period of time?
PHILIPPE SANDS: If they were complicit in the commission of a crime, then they should be investigated. And if the facts show that there is a sufficient basis for proceeding to a prosecution, then they should be prosecuted. Lawyers are gatekeepers to legality and constitutionality. If the lawyers become complicit in a common plan to get around the law, to allow abuse, then yes, they should be liable.

Soccer and football merge, in a way

This is an intriguing development. German soccer reporters are noticing that some strikers have more running and more creative responsibility in their job description. One aspect at play here is the similarity with US football:

(English translation follows) "...mitunter wirken die Laufwege wie die von Wide Receivern im Football - einem Sport, bei dem Spielzüge und Laufwege vorher angesagt und auf dem Spielfeld bis ins kleinste Detail abgestimmt sind. Andrej Woronin etwa startete beim Spiel seiner Berliner Hertha gegen den FC Bayern vom Mittelkreis aus, bewegte sich auf die rechte Seite. Nach zehn Metern schlug er einen Haken und lief diagonal in Richtungs des Strafraums, um seinem herandribbelnden Mittelfeldspieler Cicero Platz zu machen. Auf Höhe des Strafraumkreises folgte der zweite Haken, Woronin lief nach rechts in die Gasse. Dorthin spielte Cicero den Ball, Woronin schoss ihn an Michael Rensing vorbei ins Tor." http://www.sueddeutsche.de/sport/527/466112/text/4/
"...[strikers in soccer] sometimes appear to be running patterns like wide receivers do in American football - a sport where plays and running patterns are called [in the huddle] beforehand and are defined down to the most subtle head-fake detail. At the beginning of the Hertha BSC match against FC Bayern for example, Ukraine star striker Andrey Voronin of Berlin started running from the center circle toward the right flank, then veered in a "V" pattern back from the sideline, running diagonally towards the penalty area, which cleared a path for the dribbling midfielder Cicero. At the top of the penalty area, Voronin again cut back on a second hook, spurting into a "seam" and taking a pass from Cicero to kick the ball past goalie Michael Rensing into the goal."

This choreography can be seen in knowing looks before the beginning of a half or during extra time in championships. See 22-yr-old Pitroipa's mischievous smile at his teammates in Hamburg two nights ago just before the whistle blew for 15 more minutes of overtime. Lo and behold, a play had been called with a "pattern" just like in US football, with a double pass involving Jonathan Pitroipa which failed, but was agreed on beforehand. What a shame that the young striker was stopped (and "taken out") by Bremen goalie Tim Wiese in the final minutes. The outcome of the 120 minute ordeal hung on whether the Burkina Faso playmaker's dash for the goal and cunning foot-flick of the ball around the last defender, would culminate in a rousing victory. It was oh-so-close to becoming a great play-of-the-day. He is player to watch who HSV management want to groom and develop over time with a contract till 2012. He plays all over the midfield and can dribble into dangerously close range of the opponent's goal on his own or with a give-and-go or speedily recovered an errant ball with his lithe and heads-up moves.

If one of his striker teammates like Petric, Olic or Guerrero are saddled with an injury or benched for accumulated yellow cards, his hour will have come.