It would appear that the wizards of Wall Street and their Washington friends who pretend to regulate them don’t learn from their past mistakes. Only months after Wall Street’s schemes to package and sell subprime mortgages nearly brought the world economy to its knees, the investment bankers are back at it with a new scheme which actually does more damage to Americans than their subprime escapades brought about.

The heart of the subprime mortgage crisis was the conspiracy between greedy mortgage bankers and investment bankers which created a new form of tradable security, the mortgage-backed bond. Since neither the mortgage brokers who wrote the mortgages nor the investment bankers who packaged and sold the bonds backed by the mortgages cared how risky the bonds were since they were selling them to investors and making their profits upfront, there was no reason in their minds to follow traditional guidelines on lending.

Basically, if a would-be borrower could sign his name and pay the origination fees, the brokers and bankers were happy to issue the mortgages and underwrite the bonds, even though they knew that the borrowers would almost certainly default and lose their homes and that the investors would end up losing what they had invested.

Of course, over the past year most of the bankers and brokers have been bailed out at taxpayer expense. Indeed, the bailout has been so successful that New York newspapers have been reporting that 2009 bonuses on Wall Street are likely to match or exceed previous levels before the debacle of 2008. Unfortunately, at a certain point federal bailout money must run out or, at least, one can hope that it will. The future national deficits already are quite frightening to any responsible citizen. But if Wall Street cannot expect additional bailout funds, how will they maintain their bonuses for 2010?

It would appear that the geniuses on Wall Street have come up with a way. Now they intend to issue bonds backed by life insurance policies belonging to the elderly. According to Wall Street analysts this will be a win-win situation. More and more elderly people find themselves in financial difficulties because their savings have been decimated by Wall Street’s last round of fraud and greed. The idea is that these elderly folks can now cash in their life policies for more than an insurance company would pay by selling them to Wall Street bankers and that the Wall Street folks would then issue bonds whose return would depend upon how quickly the old folks would be kind enough to die.

One can imagine investors and Wall Street brokers becoming a new force in health care reform. The more quickly old insured folks die, the richer the investors become. Sounds like a perfect reason to deny elderly people, at least those who have sold their policies to Wall Street, any health care at all.

Actually, schemes like this have been proposed in the past. Some countries, like England, actually allow life insurance policies to be traded on a special exchange. But most American states have prohibited such transactions as against public policy, if not decency. The idea of trading on the sickness and death of others is, I would suggest, one that most people find repugnant. And, of course, there’s also the question of the widows and children who would be left without the security of receiving the proceeds of the life insurance at the death of the insured.

Every time Wall Street comes up with a new investment scheme, it seems to be even more outrageous than the last. This one is very nearly Faustian. And it would appear that federal regulators will do nothing to stop it. But Kansas and other states can. The Kansas Legislature, when it reconvenes in January, should pass legislation that makes the sale of life insurance policies for the purpose now planned by Wall Street illegal, and any broker who attempts to sell such bonds in Kansas should be made subject to criminal penalties. Enough is enough.