Ralph Nader: ‘Rolling the Dice Again’

By Ralph Nader
Nader.org

The Wall Street gang is at it again! It’s been one year since Wall Street’s collapse and bailout took trillions from taxpayers and the sinking economy. The speculative instruments that pulled down the economy were those super-risky sub-prime mortgages, credit default swaps, collaterized debt obligations—you know—Las Vegas East, using other peoples’ savings.

As if to elaborate their gigantic con job, the investment banks, guaranteed by you the taxpayers, are now packaging life insurances policies in what sane, on the ground businesses would consider deranged exotic money plays.

Here is how the New York Times described the new securitization packages emerging from such corporate welfare goliaths as Goldman Sachs, Credit Suisse and their eager rating agency, DBRS.

“The bankers plan to buy ‘life settlements,’ life insurance policies that ill and elderly people sell for cash–…depending on the life expectancy of the insured person. Then they plan to ‘securitize’ these policies…by packaging hundred or thousands together into bonds. They will then resell these bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

“The earlier the policy holder dies, the bigger the return—though if people live longer than expected, investors could get poor returns or even lose money.”

Continuing its lead front page story last Sunday, the Times describes Wall Street as “racing ahead for a simple reason: with $26 trillion of life insurance policies in force in the United States, the market could be huge.”

The Insurance Information Institute’s chief economist was not impressed. Speaking for the life insurance business, he said: “It’s not an investment product, [it’s] a gambling product.”

The wild and crazy derivative spree is about to inject a new and recklessly ghoulish game of chance into the financial industry. The Wall Street casino boys are already drooling over the huge fees they expect to collect. Whatever wreckage occurs down the road will soak the investors. Washington, standby for another bailout!

If this sounds alarming, consider the fact that Congress has not even reported out of any House or Senate Committee any regulatory authority for the giant derivatives businesses that places bets on bets on bets in very complex financial instruments.

Trillions of lost dollars, destabilization of the economy, depletion of pension funds and college endowments—to name some affects—and Washington is still in stasis, sitting on its cushions of corporate campaign cash and consorting with industry lobbyists who want nothing done.

Still, you the taxpayers are on the hook for another round with these corporate delinquents and gamblers!

The only difference is that this time the insurance industry seems ready to fight. It does not want to be tarred with what one executive called “the brush of subprime life insurance settlements.”

If so, my advice to insurance companies is to nip this in the bud by going to Capitol Hill. This madness will not be stopped by scattered state insurance commissioners.

With all the unmet needs for productive capital, the masters of the financial universe prefer making money from money through high velocity paper speculation, instead of financing real capital structures strengthening communities around the country.

To be sure, abstract derivatives are where the huge commissions and gigantic executive pay packages flourish. It is the arena where investment banks play blackjack. Heads they win, tails you lose.

But why do people have to pay 5,6,7 percent sales taxes in stores, but the derivative dealers on Wall Street pay no sales tax on hundreds of trillions of transactions every year? Seems like a hefty double standard, which is why Cong. Peter DeFazio (Dem. Oregon) has introduced legislation to tax such speculation. (HR 1068)

In addition, Congress needs to get going and regulate these derivatives and finally repeal Clinton-era and Bush-era laws that gave them a free ride.

Finally, there needs to be a prohibition on investments in such risky instruments by fiduciary institutions. And, standards of prudence have to be reinstated. Old time bankers and pensions managers would understand such reforms. Investor rights to sue these investment firms and rating agencies for deception and fraud are weak and require strengthening.

Someday, our society needs to decide how to increase peoples’ control over their own money and establish incentives that can attract capital flows to where they can be productive. At present, perverse incentives are reflecting sheer speculative power and are promoting grotesque uses of money.

Let these casinos and their gamblers on Wall Street do what they want with their own money, but don’t let them gamble with other peoples’ money.

12 thoughts on “Ralph Nader: ‘Rolling the Dice Again’

  1. paulie Post author

    Ralph Nader is an independent. His last two presidential runs have been as an independent, with the Green Party running its own separate candidates in competition with him. His previous two runs were endorsed by the Green Party and they helped him get ballot access, but he made a point of not joining the Green Party or registering as a Green Party voter.

  2. Zippy the Clown

    “Let these casinos and their gamblers on Wall Street do what they want with their own money, but don’t let them gamble with other peoples’ money.”

    Good idea. Can we apply it to congress too?

  3. Zippy the Clown

    “The bankers plan to buy ‘life settlements,’ life insurance policies that ill and elderly people sell for cash–…depending on the life expectancy of the insured person. Then they plan to ‘securitize’ these policies…by packaging hundred or thousands together into bonds. They will then resell these bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

    “The earlier the policy holder dies, the bigger the return—though if people live longer than expected, investors could get poor returns or even lose money.”

    That should be a safe bet with the death panels that will be instituted under Obamacare.

    Remember folks, he’s not a doctor, he’s only playing.

  4. Zack

    If only Ralph could have been in those debates. Great ideas such as this one would have been on a national stage.

  5. rudya

    What do these Wall Street elites have to lose? NOTHING!

    If they win, they win big, but since they are “too big to fail”, the taxpayer will pick up the tab if they lose.

    I am totally dismayed and angry that our “leaders” have done absolutely nothing to address the “too big to fail” issue. Instead, the big players have only become even bigger in then last year.

    We are heading in absolutely the wrong direction.

  6. paulie Post author

    That’s what happens when you look to big government for solutions.

    Monopolies (such as big government) like to do business with cartels (big business) at the expense of those of us who are not too big to fail (in their view).

  7. byrdxx

    Although i generally find Ralph’s observation right on the point, here’s one issue where he doesn’t have all the facts.

    When someone has an insurance policy they don’t want anymore (kids are grown, made more money than expected, etc.), their only alternatives used to be (1) let it lapse and get nothing or (2) surrender it back to the insurance company for the “cash surrender value”. Now that there are life settlements, many policy holders can sell their policy to an investor for a lot more than the insurance company would give them. On average, sellers get about 3 times as much. No wonder the insurance companies don’t like it: instead of forcing the policy holder to surrender the policy for say $60,000 and never having to pay the death benefit, if the policy is sold, they have to pay the death benefit and the seller gets maybe $150,000. That’s certainly good for the consumer.

    The Insurance Institute has always been opposed to life settlements and you can bet it isn’t because they are altruistic on behalf of the consumer. They just want a monopoly on the purchase of policies when an old person wants to get rid of one.

  8. steve conn

    When the financial industry wants you to die sooner so it can profit, don’t you think it’s in its corporate interest for the sick to have the worst access to medical services in the Western world? No bearing on the health care debate? Think again.

  9. Kenneth Clark

    For the most part, Amerikans are stupid, lazy and greedy. That is why they are easy prey for the RICH( with YOUR money) snobs, those basturds who own the federal government and hide behind the cushy “corporate veil” that allows them to destroy your family’s wealth via globalization, out sourcing, tax breaks and other forms of lying and cheating.

    The Billionaires strangle hold on the public airways and corporate (sic.-news) outlets keeps the truth from being heard. These RepublDems, their corporate pay masters, and lap dogs in Washington are running a giant wealth transfer ponzi scheme that makes MADOFF look like a first grader.

    Ralph Nader is a voice of sanity among the madness and inspires honest Americans.

    But the War Against the Middle Class can only be defeated when the nation develops the spine to rise up in Revolution and replace the puppets in all three branches of government.

    ONLY ONE, of the people responsible for the near collapse of the banking system has been prosecuted. And this happend only after he revealed his crime and pled guilty.

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