Profits Inevitable As Death and Taxes

Banks getting taxpayer bailouts are also cashing in on the demise of people who work for them or once did.

Today's Wall Street Journal has a tutorial explaining how banks are holding $122.3 billion in life insurance on workers and retirees with themselves as beneficiaries in order to escape taxes, inflate their earnings and to fund bonuses and pension benefits:

"Though not improper, the practice is similar to what is known as 'janitors insurance,' an insurance-on-employees technique that has long been controversial. Critics say the banks' insurance contracts are a way for companies to create tax breaks for funding executive pensions...

"Companies don't use the policies as piggy banks to pay for compensation and benefits. Rather, they benefit from keeping the money in the contracts."

Gains on investments are not only tax free but reported as income each quarter to offset interest on deferred pay owed to executives.

According to the Journal, banks have nearly doubled the amounts of such insurance in the past four years. Bank of America, which has taken $52.5 billion from taxpayers so far, holds an estimated $17.3 billion of such investments in the deaths of employees while Wells Fargo (including its Wachovia acquisition) has a similar amount awaiting future obituaries.

You may not be able to get blood from a stone, but American banks are doing very well with corpses.