Wall Street to “Securitize” Life Insurance Policies

For the last few decades, financial capital has trumped the “real economy” as far as making money is concerned. Given that they don’t produce any actual goods to exchange, Wall Street has to use “financial wizardry” to come up with its large profits. In other words, they have to continue to reinvent the shell game. These practices gained national attention when sub-prime home loans were “securitized” by lenders and sold to various different investors until no one knew who actually owned what. Along with various other fancy-sounding investment schemes, these sub-prime loans were largely blamed for the current crisis of capitalism. Many politicians, including Barack Obama, have sternly rebuked Wall Street for being “greedy” and “irresponsible.”  

That particular shell game, it would appear, is over. Or at the very least, it is considerably less lucrative. But the system as a whole remains intact. The New York Times recently reported on a brand new financial invention that is taking Wall Street by storm. According to the Times, “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.”  

While the disgusting nature of such a “product” is obvious, it is important not to limit our criticisms to moral arguments. It is the system itself we need to address. For years we were told that the boom-bust cycle inherent in capitalism was over. They had finally figured it out and we should expect only steady growth from now on. Now, within the context of the crisis, they have had to change their analysis just a bit. According to the experts, the problem was a few “bad apples” on Wall Street who were irresponsibly going after short-term gains rather than long-term stability. Therefore, we need to add some more regulations. We need to tweak and fine-tune capitalism a bit more and then it will work just fine. Of course, we have heard this all before.

We, as Marxists, understand that crises are inherent to capitalism. No amount of regulations or disingenuous fist shakings against Wall Street will change that. The fact that they are now poised to take bets on when grandma is going to die doesn’t so much reflect the sick and disgusting nature of the individuals at investment banks (although some certainly fit that description), as it does the sick and disgusting nature of the entire economic system. Capitalism is so historically rotten it is almost comical the desperate lengths it has to go to shuffle around money in order to make more money for  a handful of people.  

However, despite the rottenness of capitalism, there is no “final crisis.” Without a conscious and organized effort by the majority to overthrow the system, it will remain in place in some form or another. It will continue to get bailed out and we will continue to work for low wages, get kicked out of our homes, go off to fight wars against other workers and young people, and on and on. Despite the obstacles, we do hold the power to change society. Not a wheel turns, not a light shines without the permission of the working class. That has been said many times, but it remains both a true and powerful statement. It is time we replaced the chaotic mess that is market capitalism with a democratically planned economy.

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