JP Morgan Taking Bets Chase Bets $10.4 Billion On The Early Death Of Workers Pam Martens and Russ Martens wallstreetonparade.com March 24, 2014 Families of young JPMorgan Chase workers who have experienced tragic deaths over the past four months, have been kept in the dark on many details, including the fact that the bank most likely held a life insurance policy on their loved one – payable to itself. Banks in the U.S., as well as other corporations, are allowed to make multi-billion dollar wagers that their profits from life insurance policies on employees will outstrip the cost of paying premiums and other fees. Early deaths help those wagers pay off. According to the December 31, 2013 financial filing known as the Call Report that JPMorgan made with Federal regulators, it has tied up $10.4 billion in illiquid, long term bets on the death of a large segment of its employees. The program is known among regulators as Bank Owned Life Insurance or BOLI. Federal regulators specifically exempted BOLI in passing the final version of the Volcker Rule in December of last year which disallowed most proprietary trading or betting for the house. Regulators stated in the rule that “Rather, these accounts permit the banking entity to effectively hedge and cover costs of providing benefits to employees through insurance policies related to key employees.” We have italicized the word “key” because regulators know very well from financial filings that the country’s mega banks are not just insuring key employees but a broad-base of their employees. Just four of the largest U.S. banks, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup hold over $53 billion in investments in BOLI according to 2013 year-end Call Reports. Death benefits from life insurance is purchased at a multiple to the amount of the investments, meaning that $53 billion is easily enough to buy $1 million life insurance policies on 159,000 employees, and potentially a great deal more. Industry experts estimate that the total face amount of life insurance held by all banks in the U.S. on their employees now exceeds half a trillion dollars. When the General Accountability Office (GAO) looked into the matter for Congress in 2003 and 2004, it found the insidious practice of continuing the life insurance even after the employee had left the company – nullifying any ability to consider him or her a “key” to the business. The GAO wrote: “Unless prohibited by state law, businesses can retain ownership of these policies regardless of whether the employment relationship has ended.” The GAO found that multiple companies held life insurance policies on the same individual.
In 2006, Congress passed the Pension Protection Act which included a section on these policies. Instead of outlawing BOLI and its corporate sibling, Corporate Owned Life Insurance (COLI), Congress grandfathered all of the millions of previously issued policies while tweaking a few tax and reporting rules. One bedrock of insurance law dating back to the 19th Century is that a party must have an insurable interest in the life of another person in order to take out an insurance policy. The U.S. Supreme Court held in Warnock v. Davis in 1881 that “in all cases there must be a reasonable ground, founded upon the relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured. Otherwise the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured. Such policies have a tendency to create a desire for the event. They are, therefore, independently of any statute on the subject, condemned, as being against public policy.” While it is highly questionable that rank and file employees are “key” to the success of a business, there is certainly no question that their contribution to the business ends when they terminate their employment. And yet, somehow, banks are allowed to collect death benefits on terminated workers right under the nose of State insurance regulators. The explanation is likely the secrecy which surrounds these policies, limiting knowledge of death payments to just the bank and the insurance company. One reason banks are enamored with taking out policies on other people’s lives and keeping the practice as hush-hush as possible with the willing consent of regulators is that the gullible U.S. taxpayer who bailed out the banks to the tune of trillions of dollars from 2008 to 2010 and is now subsidizing too-big-to-fail through an implied permanent Federal backstop, is also subsidizing these death wagers. Both the buildup in the cash value of the policy over time and the payment of the death benefit are tax-free income to the bank; the more workers they insure, the more tax-free income they receive to help their bottom line; and the less corporations pay in their share of Federal income taxes, shifting more and more of the burden to the struggling middle class. Banks have also exploited other tricks with the billions invested in these policies. JPMorgan is the assignee for Patent number 5,806,042 at the U.S. Patent and Trademark Office, titled “System for Designing and Implementing Bank Owned Life Insurance (BOLI) With a Reinsurance Option.” Noteworthy features of this scheme include the following: “The purposes of the consent requirements and statutory requirements for insurable interest are to insure that a bank does not take out a death benefit policy on the life of an employee which exceeds the bank’s loss. In general, a bank may take out a death benefit policy in the amount which is a multiple of 8-10 times the annual compensation of that employee…” “Reinsuring the BOLI plan by a captive insurance subsidiary of the parent bank or holding company allows the bank to augment the cash value gains of the BOLI plan by providing cash revenue sources from fee income associated with investment and trust management. Reinsurance also minimizes the impact to the bank’s profit and loss statement by keeping the assets within the corporate structure of the bank holding company…”
“The administrative support subsystem performs periodic sweeps of social security records to identify death claims for covered employees who have terminated or retired…” Whether JPMorgan is providing its own reinsurance through an affiliate or just suggesting this patented idea to others is unknown. What is known is that JPMorgan has multiple insurance subsidiaries in both the U.S. and the U.K. When the final Volcker Rule was published, it carried this notation in footnote 1813: “This requirement is not intended to preclude a banking entity from purchasing a life insurance policy from an affiliated insurance company.” It is doubtful that regulators are fully aware that BOLI assets may actually remain under the control and management of the banks, rather than the insurance companies providing the death benefits. On March 15 of last year when Senator Carl Levin opened the hearing on the $6.2 billion in losses of depositors’ money in the exotic derivative bets by JPMorgan’s London Whale trading fiasco, he chastised the bank for failing to make loans to worthy businesses. Levin said JPMorgan had “the lowest loan-to-deposit ratio of the big banks, lending just 61 percent of its deposits out in loans.” Apparently, said Levin, “it was too busy betting on derivatives to issue the loans needed to speed economic recovery.” Ina Drew, the head of the Chief Investment Office (CIO) at JPMorgan responsible in 2012 for overseeing the London Whale trades (who has since left the firm) revealed in her testimony to Levin’s committee that she was also overseeing the “company-owned-life-insurance portfolio…” Drew testified: “The CIO engaged in a wide range of asset-liability management activities. As of the first quarter of
2012, the CIO managed the Company’s $350 billion investment securities portfolio (this portfolio exceeded $500 billion during 2008 and 2009), the $17 billion foreign exchange hedging book, the $13 billion employee retirement plan, the $9 billion company-ownedlife insurance portfolio, the strategically-important MSR hedging book, and a series of other books including the cash and synthetic credit portfolios.” Banking used to be a simple business to understand. The bank took in insured deposits and then loaned out the money at a higher rate than it paid on the deposits to people needing loans to buy homes, to start new businesses or expand existing ones. But then came the 1999 repeal of the Glass-Steagall Act, which had kept commercial banks separate from Wall Street trading houses since the Great Depression, and the partial repeal of the Bank Holding Company Act of 1956 which had barred commercial banks from merging with insurance companies. As a result of those repeals through legislation known as the Gramm-Leach-Bliley Act, Wall Street’s behemoth banks are more dangerous than at any time since the 1929 crash. The banks are essentially everywhere you don’t want your insured deposits to be. Each mega bank now owns thousands of other businesses in fields like insurance, mergers and acquisitions, stock and bond underwriting, securitizations, commodities trading, structuring of exotic derivative bets, and the latest – making tens of billions of dollars in wagers on the deaths of their own employees. Because nothing in the banks’ financial filings break out the number of lives the company has insured; how far down in rank the company insures its workers; or the total amount of life insurance it has in force, Wall Street On Parade sent two emails to two of JPMorgan’s top media relations personnel asking those questions. We gave them four days to respond. Despite pointing out that the questions go to the heart of the quality of earnings of JPMorgan Chase, an issue to which shareholders are entitled to transparency under U.S. securities laws, neither individual responded. Because regulators have become willful enablers to some of the worst practices on Wall Street, the Wall Street worker must now look out for himself. Various state laws prohibit BOLI without the consent of the insured. New York State’s Department of Financial Service says this about BOLI policies on employees residing within New York: “Under some insurance programs, New York State insurance regulations require that employees approve the purchase of life insurance at initiation of coverage and have a notification and terminate right when they leave employment. Procedures that standardize notification and documentation should exist to ensure compliance with these insurance requirements and other applicable laws and regulations. Failure to comply could jeopardize the tax benefits associated with the insurance.” Notice the big penalty for banks that don’t comply; they could simply lose the tax benefits.
Banker Deaths Leave Industry Concerned As Coroners Probe Ben Moshinsky Bloomberg March 24, 2014
Coroners in London are preparing to investigate two apparent suicides as unexpected deaths by finance workers around the world have raised concerns about mental health and stress levels in the industry. The inquest into the death of William Broeksmit, 58, a retired Deutsche Bank AG (DBK) risk executive found dead in his London home in January, will start tomorrow. The inquest for Gabriel Magee, a 39year-old vice president in technology operations at JPMorgan Chase (JPM) & Co., who died after falling from the firm’s 33-story London headquarters, is scheduled for late May. The suicides were followed by others around the world, including at JPMorgan in Hong Kong, as well as Mike Dueker, the chief economist at Seattle-based Russell Investment Management Co. The financial world’s aggressive, hard-working culture may be hurting itself, professionals advising on mental health in the industry say. At greatest risk are “those who have not cultivated friendships, networks, outside of their company,” said Stewart Black, professor of global leadership and strategy at IMD, a business school in Lausanne, Switzerland. “A lot of executives keep their nose down, work hard, do great work and don’t really cultivate extra networks,” he said. “Those broader networks act as safety valves.” Banks are starting to realize the scale of the problem, said Peter Rodgers, chairman of the City Mental Health Alliance, which counts Morgan Stanley (MS) and Bank of America Corp. among its members.
Cultural Change When the group was set up last year banks, law firms and accountants including Goldman Sachs Group Inc. (GS), Linklaters LLP and KPMG LLP, “no one in the City was really talking” about mental health, Rodgers said. Now they have 18 firms on their list, including the Bank of England, the central bank. The banking sector has “seen a number of initiatives” to improve staff well-being but they “need to be accepted by a cultural change at the very top,” said Rodgers, who is also deputy general counsel at KPMG. Magee’s family didn’t return a phone call seeking comment. Ed Adler, a spokesman for the New York-based Broeksmit Family Foundation, also didn’t return a call seeking comment. Kathryn Haynes, spokeswoman for Deutsche Bank in London, and Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment. Finance “does tend to have a long-hours culture,” said Emma Mamo, who leads workplace initiatives at Mind, a U.K. mental health charity. “People can’t keep doing long hours; you need perspective and downtime.”
‘Finest Minds’ Broeksmit died on Jan. 26 at his home in Chelsea, west London, according to a memo to employees obtained by Bloomberg News. Police said he was found hanging and they aren’t treating the death as suspicious. “He was considered by many of his peers to be among the finest minds in the fields of risk and capital management,” Deutsche Bank’s co-CEOs Anshu Jain and Juergen Fitschen wrote in the memo. They said Broeksmit was “instrumental as a founder of our investment bank.” Dueker was found dead at the side of a highway that leads to the Tacoma Narrows Bridge in Washington state, according to the Pierce County Sheriff’s Department. He was 50. The reviews into the deaths of Broeksmit and Magee will be overseen by a coroner, whose role is to question witnesses and police to determine where, when, how and why sudden or unexplained deaths occur, including suicides. Magee’s inquest will be held by Mary Hassell, the coroner who said practices at Bank of America Merrill Lynch’s London office may have been a factor in the death of 21-year-old intern Moritz Erhardt from an epileptic seizure last year.
5 A.M. E-Mail “It may be that Moritz had been working so hard that his fatigue was a trigger for the seizure that killed him,” Hassell said at the Nov. 23 inquest. “But that is only a possibility.” Erhardt was found unconscious in a shower at Claredale House, a student residence in East London, on Aug. 15. His parents told the coroner that their son contacted them the day before his death in a 5 a.m. e-mail and that they were worried he was working too hard and sleeping too little. Hassell questioned Juergen Schroeder, Erhardt’s development officer at Merrill Lynch, about whether working late was necessary in investment banking. “There is a general expectation in our profession,” Schroeder said.
Weekends Off Bank of America told staff on Jan. 10 its junior bankers should take some weekends off. Christian Meissner, head of global corporate and investment banking at the lender, said in a memo to employees that analysts and associates should “take a minimum of four weekend days off per month.” JPMorgan, which has had at least two suicides so far this year, isn’t a member of the City Mental Health Alliance and hasn’t publicly announced measures to deal with the aftermath of the deaths. “JPMorgan haven’t come forward to us and we haven’t approached them either,” Rodgers said. “There’s a period of mourning. The last thing they need is us sticking our heads in. I’m confident they will come forward.”
30 Survey Results That Sound False But That Are Actually True Michael Snyder Economic Collapse March 24, 2014
You will be shocked at what some Americans actually believe. For example, close to 90 percent of us believe that we are eating a healthy diet, and yet more than third of the population is officially obese. 65 percent of all Americans say that they are dissatisfied with the government, and yet nearly a third of us would be willing to submit to a “TSA body cavity search” in order to get on an airplane. As you will see below, Americans are angrier and more frustrated with government and with their lives than ever before, but we also exhibit almost unbelievable levels of sloth and apathy. Some of the numbers below are quite funny, and others are absolutely stunning. But they all say something about who we have become as a nation. The following are 30 survey results that sound false but that are actually true… #1 According to a recent Rasmussen Reports survey, 52 percent of Americans “do not think the economy is fair to those willing to work hard”. #2 70 percent of all Americans do not “feel engaged or inspired at their jobs”. #3 According to another recent Rasmussen Reports survey, 59 percentof Americans believe that “less government involvement in the economy” would help reduce the size of the income gap in this country. (And those 59 percent are actually correct.) #4 20 percent of all government workers and 26 percent of all Obama supporters consider the Tea Party to be “the biggest terror threat” that America is facing. #5 Approximately 30 percent of all American workers have $1,000 or less saved up for retirement.
#6 A worldwide survey conducted by the Worldwide Independent Network and Gallup found that 24 percent of people around the world consider the United States to be the biggest threat to peace. Pakistan was in second place with just 8 percent. #7 60 percent of Americans report feeling “angry or irritable”. Two years ago that number was at 50 percent. #8 36 percent of Americans admit that they have yelled at a customer service agent during the past year. #9 29 percent of Americans believe that “cloud computing” involves an actual cloud. #10 A survey of employers that currently pay minimum wage to at least some of their employees found that 38 percent of them would start laying off employees if the minimum wage was raised. #11 One survey found that 56 percent of Americans believe that it is okay for the government to track “the telephone records of millions of Americans” in order to keep us safe. #12 When George W. Bush was president, 61 percent of Democrats considered NSA surveillance to be “unacceptable”, but now that Obama is in the White House, only 34 percent of them consider it to be “unacceptable”. #13 67 percent of Americans support the use of unmanned drones in “homeland security missions” inside the United States. #14 One survey found that 51 percent of all Americans agree with this statement: “it is necessary to give up some civil liberties in order to make the country safe from terrorism.” #15 Close to one-third of all Americans would be willing to submit to a “TSA body cavity search” in order to fly. #16 65 percent of Americans are dissatisfied “with the U.S. system of government and its effectiveness”. That is the highest level of dissatisfaction that Gallup has ever recorded. #17 Only 8 percent of Americans believe that Congress is doing a “good” or “excellent” job.
#18 70 percent of Americans do not have confidence that the federal government will “make progress on the important problems and issues facing the country in 2014″. #19 According to a survey conducted by the National Geographic Society, only 37 percent of all Americans in the 18 to 24-year-old age range can find the nation of Iraq on a map. #20 Close to 25 percent of all Americans do not know that the United States declared independence from Great Britain. #21 Right now, 29 percent of all Americans under the age of 35 are living with their parents. #22 According to one survey, 24 percent of all U.S. teens that have a sexually-transmitted disease say that they still have unprotected sex. #23 Approximately one out of every five teenage girls in the United States actually wants to be a teenage mother. #24 The percentage of Americans that “believe there are signs that aliens have visited Earth” is actually higher than the percentage of Americans that believe that Jesus Christ is the Son of God. #25 According to one recent survey, only 35 percent of all Americans say that they are better off financially than they were a year ago. #26 It is hard to believe, but 56 percent of all Americans are considered to have “subprime credit” at this point. #27 89.7 percent of all Americans believe that they are eating a healthy diet. Meanwhile, approximately 36 percent of all Americans are obese. #28 44 percent of all Americans do not have a first-aid kit in their homes. #29 48 percent of all Americans do not have any emergency supplies stored up at all. #30 53 percent of all Americans do not even have a 3 day supply of nonperishable food and water in their homes. What will they do when a major crisis or emergency strikes? Do they actually believe that the government will swoop in to save them if something happens?
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