Mortgage Backed Securities — Round Two?

By |2015-05-22T20:04:38+00:00August 12th, 2013|Annuities, General Business|

It was the best deal in town, you could buy any house you wished at any price you wished and you didn’t need to prove income.  What a deal.  We let Wall Street take over the housing market by providing the vehicles to attract investors who wanted to earn higher interest buying small slices of mortgages.

Guess what happened?

The economy tanked, the housing market tanked, individual’s tanked and Wall Street made a fortune.

Now on the horizon is another white horse heading our way, the annuity way.  This stately stead is riding high and growing daily; the stead is named Private Equity (PE). PE Firms who want a piece of America’s one true safety net for retirees, annuities.

PE invested in The Hartford and now The Hartford no longer issues annuities.  Private Equity Firms only know one thing, buy, dismantle, reap profits and move on. Their sites are set on our industry and they are coming. In fact, a  few are already here, Athene, Guggenheim and others have already planted their flag.

With the PE Firms will come new ways of doing things, new ways for Wall Street to invest in our products, things such as buying the investments side, slicing it up and reselling it to fixed interest investors.  Who will win and who will lose?  My guess is the PE Firms will make a bundle, the client will make a tiny return and the annuity industry will be raped and pillaged.

In a recent move the New York Department of Insurances has notified the PE Industry it wants answers before any deal is ok’d by them. How is the risk going to be managed and who is ultimately responsible?

Here is an excerpt from a recent article: Regulators are inquiring into how portfolio managers approach risk when it comes to annuities’ investable assets, a source said. New owners of annuities portfolios may elect to use these assets to back riskier investments like mortgage-backed securities.

What?  Wall Street using annuity retirement money to invest in their already failed products?

Why are PE Firms so interested in the annuity industry?  Just think of $250 billion laying ion the table each year! That money is retirement money for millions of people, people who trust the annuity system.  Now they will be forced to trust Wall Street?

After what Wall Street did to our nation with the Mortgage Backed Security Ponzi scheme, I wouldn’t trust them with my garbage.

Here is more about the New York Department of insurance investigation:

http://www.thedeal.com/content/regulatory/pe-insurance-deals-draw-ny-regulators-ire.php

About the Author:

Bill Broich
Bill Broich is a well-known annuity expert with over 30 years of experience. He has written hundreds of articles on annuities and other financial topics, and has been a featured commentator on TV, Radio and the Internet. To follow Bill's profile, click here.