The ‘securitization of mortgages – bundling mortgage policies and selling them on to investors – is considered to be one of the major reasons for last year’s financial collapse. Now, Wall Street banks want to do it all again – but this time, with life insurance policies instead of real estate. The New York Times reports that large investment banks are lining up to begin securitizing ‘life settlements, life insurance policies that ill and elderly people sell so that they can get cash before they die. According to the Times: [Banks] 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. 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. Life settlement companies – companies that buy life insurance policies and cash in when the original policy holder dies – have been around for some time, but this would […]