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Friday, 28 February 2014 06:21

JPMorgan Bets on Death As Wall Street Suicides Jump Up

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MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT

adeadpeas(Photo: TheTim)Fortune Magazine (as posted on CNN Money) asks in a February 27 article, "Is there a suicide contagion on Wall Street? A series of untimely deaths at JPMorgan Chase and other banks has left observers wondering if there are more to come."

Apparently, there has been a rash of suicides in the financial executive community:

A few days ago, a Wall Street executive was debating whether he could get away from the office long enough to see his shrink uptown. In the midst of a busy workday, it was looking unlikely. Then he stumbled across an article in the New York Post with the disquieting news that a J.P. Morgan Chase (JPM) employee had jumped to his death from the bank's offices in Hong Kong, just three weeks after a fellow banker at the firm had committed suicide by jumping off the roof of the bank's London headquarters. "JPMorgan suicide is 3rd mysterious death in weeks," read the Post headline.....

The rash of suicides has sent a shudder through Wall Street and beyond. The third death referenced by the Post—that of a J.P. Morgan executive director who died inside his Connecticut home in January—did not appear to be intentional. (A report is still pending.) Yet the J.P. Morgan incidents are only the most recent in a string of at least a half-dozen suicides in the financial world since late August. Those include executives at Zurich Insurance Group (ZURVY), Deutsche Bank (DB), and Russell Investments, among other firms.

Whether this grim statistic is a trend or just a short-term cluster remains to be seen -- as well as the precipitating factors surrounding the suicides.

The website Wall Street on Parade, however, takes note -- and details -- the ghoulish irony that JPMorgan Chase is in the business of betting on death:

According to information available at the U.S. Patent and Trademark Office, JPMorgan created the LifeMetrics Index in March 2007 as an “international index designed to benchmark and trade longevity risk.” The index was said to enable pension plans to hedge the risk of payments to retirees and incorporated “historical and current statistics on mortality rates and life expectancy, across genders, ages, and nationalities.” From 2010 through 2013, JPMorgan has received patent approval on four longevity related patents.

Reuters reported on August 26, 2013 that the long-term longevity bets taken on by the big banks have now started to cause pain as international capital rules known as Basel III require more capital to be set aside for longer-dated positions. The article noted that “JPMorgan likely has the biggest holdings of long-dated swaps because it is the biggest swaps trader on Wall Street, responsible for about 30 percent of the market by some measures, traders at rival firms said.”

One extremely long longevity bet taken on by JPMorgan was reported by Insurance Risk on October 1, 2008. According to the publication, JPMorgan entered into a 40-year £500 million notional longevity swap with Canada Life whereby Canada Life would make a fixed annual payment in return for a floating liability-matching payment that would increase if the annuitants lived longer than expected. JPMorgan was believed to have passed on some of the risk to hedge fund investors but retained the counterparty risk. Because many of these deals are private, the full extent of JPMorgan’s exposure in this area is not known.

In plain language, this means that JPMorgan Chase is betting that people die sooner rather than later.  That is because JPMorgan will need to pay the insurance companies if they have to payout more money than they had actuarially predicted because the people they cover are living longer.  The bottom line: JP Morgan is looking to profit from early deaths.  The longer the insured individuals live beyond an agreed upon average age, the more the bank must reimburse the insurance companies.

Wall Street on Parade also speculates that JPMorgan may have actually profited from the suicides of their employees.  That is because the bank has followed the trend of many companies in taking out life insurance policies on employees that are payable to the corporation.  This is how Wall Street on Parade explains the scheme:

Wall Street veterans have also commented on the fact that JPMorgan may actually stand to profit from the early deaths of the two young men in their 30s. As we reported in March of last year, when the U.S. Senate’s Permanent Subcommittee on Investigations released its report on JPMorgan’s high risk bets known as the London Whale debacle, its Exhibit 81 showed that JPMorgan’s Chief Investment Office was also overseeing Bank Owned Life Insurance (BOLI) and Corporate Owned Life Insurance (COLI) plans which allow the corporation to reap huge tax benefits by taking out life insurance policies on workers – even low wage workers – and naming the corporation the beneficiary of the death benefit. Both the buildup in the policy and the benefit at death are received tax free to the corporation.

According to the exhibit, the Chief Investment Office was tasked with “Maximization of tax-advantaged investments of life insurance premiums” for the BOLI/COLI plans. According to a report in the Wall Street Journal in 2009, JPMorgan had $12 billion in BOLI, noting that a JPMorgan spokesperson had confirmed the figure. Other insurance industry experts put the total for both BOLI and COLI at JPMorgan significantly higher.

In the vernacular, what JPMorgan is doing is engaging in the purchase of what has come to be known as "dead peasant" insurance policies on employees. The pejorative nickname, according to a website focusing on the practice, had its origins in a lawsuit in which a major corporation indicated that it regarded deceased employees as dead peasants:  

Winn Dixie Stores bought life insurance policies on approximately 36,000 of its employees, without their knowledge or consent, and named itself as the policies’ beneficiary. The insurance brokerage firm that placed the policies prepared two memos describing the deceased employees as “Dead Peasants.” These memos were part of the court’s record in a lawsuit in which the United States Court of Appeals for the Eleventh Circuit held that Winn-Dixie’s policies were a sham transaction for federal income tax purposes. The memos were later used by reporters such as Ellen Schultz and Theo Francis of the Wall Street Journal and L.M. Sixel of the Houston Chronicle and incorporated into articles about this type of insurance.

Perhaps "dead peasants" is a fitting metaphor for how the masters of the universe who head the Wall Street financial behemoths view us all -- or maybe the better way to put it is "live suckers or dead peasants."

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