Wall Street’s Latest Moneymaker

According to the lead story in today's New York Times, Wall Street banks have found a new way to make lots of money. This time, it’s though bundles of life insurance. “The bankers plan to buy ‘life settlements,’ life insurance policies that ill and elderly people sell for cash—$400,000 for a $1 million policy, say, depending on the life expectancy of the insured person,” the Times reports. The plan is to package life-insurance policies together into bonds that are then resold to investors. Those investors, in turn, receive big payouts when the people carrying the insurance die. The earlier the policyholder passes away, the bigger the return. Regardless, Wall Street will get “sizeable fees” for creating, reselling, and trading the bonds.

After weeks of controversy, White House environmental adviser Van Jones resigned yesterday,  the Washington Post reports. "On the eve of historic fights for health care and clean energy, opponents of reform have mounted a vicious smear campaign against me," Jones, special adviser for green jobs at the White House Council on Environmental Quality, said in the statement announcing his resignation late last night. "They are using lies and distortions to distract and divide." Jones has made two public apologies recently, one for signing a petition that suggested that Bush-administration officials "may indeed have deliberately allowed 9/11 to happen, perhaps as a pretext for war" and the other for using “a crude term” to describe Republicans in a speech he gave before joining the Obama administration.

The Wall Street Journal reports that American International Group (AIG) will sell a portion of its investment-advisory and asset-management businesses for a price tag of $500 million. Bridge Partners LP, a company owned by Hong Kong private-equity firm Pacific Century Group, is the expected buyer. The deal, announced yesterday, comes at a time when AIG is struggling to pay back billions in U.S. government loans. The price of the sale, while “well below” the $800 million that was proposed this spring by other possible buyers, the paper says, is still higher than the “low end of expectations.” The unit, called AIG Investments, manages $88.7 billion of investments for mostly institutional and some retail clients.

At yesterday’s G-20 meetings in London, the world’s top finance officials reached a consensus about new banker-compensations rules and agreed to demand larger capital cushions for banks. According to the Wall Street Journal, “the agreement on bankers' pay calls for a large portion of bonuses to be clawed back if bank performance subsequently deteriorates. It also calls for the deferral of a share of bonuses.” Still, there was no agreement to put a cap on bonuses—an idea promoted by France and Germany but resisted by the United States and the United Kingdom. The agreement to increase bank capital was “a victory” for Timothy Geithner, who launched the initiative late last week. While he’s been “cool” to bonus restrictions, instead he’s been “emphasizing the need for higher capital requirements at banks and other broader regulatory measures to prevent a repeat of the financial crisis” according to the NYT.

Finally, the New York Times reports the toy maker Lego is thinking “beyond the brick” these days. As other toy makers suffer—from incursions like video games, iPods, and other “digital diversions—Lego has emerged as a winner. The Danish toymaker has benefited from “double-digit sales gains and swelling earnings.” That’s partly because the company and its toys have changed over time. “In recent years, Lego has increasingly focused on toys that many parents wouldn’t recognize from their own childhoods. Hollywood themes are commanding more shelf space, a far cry from the idealistic, purely imagination-oriented play that drove Lego for years and was as much a religion as a business strategy,” the paper says. While the shift to more commercial mentality has disappointed Lego “purists,” at least for now, it seems to be paying off for the company.

Note: Today’s Business Press will take tomorrow off for the Labor Day holiday.