Episode 947: Some-of-the-Money Ball

Baseball is a winner-take-all career. There is a very small chance of making massive amounts of money. But more importantly, there is a very big chance of making almost no money. Some minor leaguers earn $8,000 dollars per year.

To have more chances at winning the baseball lottery, some players are deciding to get together and face the odds as a group. They are joining “income pools,” which could change the way baseball players, and lots of professionals, think about how we get paid.

New York Life Insurance Sold Slave Insurance

Banks like JP Morgan Chase and Wells Fargo accepted Slaves as Collateral

Rachel Swarns of the New York Times joins us to discuss what she discovered when she followed the money trail of one of the nation’s top financial institutions all the back to the 19th century.
.. RACHEL: In 1847, Godfrey died in the Midlothian Coal Mines. We still don’t know exactly how he died, but in New York Life’s accounting of the deaths that happened, they simply described, “burned to death.

New York Life was good for its policy. And Nicholas Mills put in a claim and within months of Nicholas Mills’ claims— three months, actually— they paid up: $337. The folks at New York Life collected a lot of information, but not information that his family, today, might wanna know, or people looking at the institution of slavery might wanna know. They did not record his last name. They did not record where he was, or if he was, buried. Simply “burned to death” and “$337 payment.”

CHENJERAI: This payment to a Southern slave owner wasn’t coming from Charleston, or Richmond, it was coming from New York.
.. And slaves were often used by people who went to a bank, wanted to get a loan, and had to, as we often do today, show some property for collateral, and would say, “okay, I got these 20 guys here. This is my collateral.”

That was a very pernicious system because, if you think it through, what happens when that guy defaults? Well, we know what happens if you default on your car loan today. The bank will come take it. The same thing happened back then.

JACK: Wait a minute. There were slave repo men?

RACHEL: There were slave repo men.

It’s very simple. You default on your loan, you have given up some collateral, the banks then become the owners of that property. And so the banks became owners of human beings, of these enslaved people. They took them, repossessed them, and tried to sell them, because it’s just like in foreclosures, you know, they don’t wanna hold on to these distressed properties. You know, they’re not in the real estate business. Banks are not really in the slave owning business.

RACHEL: We are talking about, you know, there, there are contemporary banks that have this history, you know.

CHENJERAI: Could you, could you name them?

RACHEL: So some of the banks that were involved in this business, banks who accepted slaves as collateral were J.P. Morgan Chase and Wells Fargo.
.. CHENJERAI: So this how the descendants are responding? How are the insurance companies responding to this?
RACHEL: You know, no one really wants a call from a reporter saying, talking about…. their ties to slavery. It’s, it’s just not … A lot of people are looking-


RACHEL: … for coverage from the New York Times. This is not an issue where anyone is happy about a connection.

This information about slave insurance and these records came out in the 2000s, when states and municipalities required companies to disclose their ties to this period of time. So, you know, there was some trying to say, “well this is old news, there’s no reason to delve into this.” In some ways, it’s no surprise that-
.. There was a lawsuit that was filed particularly against New York Life and other companies that was dismissed in 2004, after a judge ruled that the black plaintiffs had been unable to establish a direct link to the companies that they had sued, and that the statute of limitations had run out.
With the advance of genealogy and the digitization of records, it’s now possible, difficult, but possible, to trace these people, and their descendants to the present day.
.. JACK: And in terms of just Americans coming to grips with this history, how should we- how do we tell that story?

RACHEL: You know, I think, with a lot of these issues, you know, there is the moral question, right? And what do we do with that, as, as Americans? It is simply true that African Americans were not paid for labor, right? For a long time. (laughing).
.. Ta-Nehisi Coates obviously did that really provocative piece about reparations and arguing for reparations. And he actually was at a conference and he was talking about that debate in American society and saying… You know people were saying, “Well, what would it look like?” and he said, “You know, we can’t really talk about what reparations looks like if there is no consensus that there was a debt.”
And I think that’s where America is right now is trying to figure out is there a debt? And part of the work that I do, and the work that a lot of people are doing in this area and looking at these kinds of connections between slavery and today, is just illuminating those kinds of connections.

Climate Change Is Forcing the Insurance Industry to Recalculate

Insurers are at the vanguard of a movement to put a value today on the unpredictable future of a warming planet

When a wildfire engulfed the Canadian oil-sands boomtown of Fort McMurray two years ago, it hit insurance company Aviva PLC out of nowhere.

The British firm had been active in Canada since 1835. Its actuaries long believed wildfire risk to homes in the area was almost nonexistent, it says. Yet flames on the town’s outskirts roared across an area larger than Delaware, forcing 100,000 people to evacuate and leaving insurers with $3 billion in damages to cover.

“That is not a type of loss we have experienced in that part of the world, ever,” says Maurice Tulloch, the Toronto-based chief executive of Aviva’s international insurance division. “The previous models wouldn’t have envisioned it.”

Aviva studied the incident and concluded the wildfire was an example of how the earth’s gradually warming temperature is changing the behavior of natural catastrophes. Aviva increased premiums in Canada as a result.

The price of homes on the U.S.’s eastern seaboard battered by fiercer storms and higher seas is lagging behind those inland. The price of farmland is rising in North America’s once-frigid reaches, partly because of bets it will become more temperate. Investors are turning fresh water into an asset, a wager in part that climate change will make it scarcer.

.. After the Canadian wildfire, Aviva’s changes to its risk models filtered into its home-insurance premiums in Canada, which increased by roughly 6% since 2016, partly because of its research into catastrophe risks.

For most insurers, rates aren’t rising—yet. A flood of capital into the industry from pension and hedge-fund investors, driven by low interest rates, has increased competition and pushed down property-catastrophe reinsurance prices in the past decade.

And property insurance and reinsurance contracts typically last one year, so an insurer can recalibrate yearly as risks change. “Global warming may be occurring. Probably is,” says Warren Buffett, chief executive of Berkshire Hathaway Inc., which has a major reinsurance business. “But it hasn’t hurt the reinsurance industry. And people are pricing still as if it won’t, on a one-year basis.”

If reinsurance contracts covered 30 years, he says, “I’d be crazy not to” include the risks.

.. Insurers such as Swiss Re Group say hurricanes like Harvey and Florence, which caused widespread flooding, could represent a more common occurrence in the coming decades.

.. The insurance industry has historically changed after big disasters. Natural-catastrophe modeling took off after Hurricane Andrew struck Florida on Aug. 24, 1992, causing an estimated $15.5 billion of insured losses. Thirteen insurance companies were ordered liquidated

.. The climate has grown about 1.8 degrees Fahrenheit warmer since the late 19th century. A consensus of scientists puts blame substantially on emissions of greenhouse gases from cars, farms and factories.

.. Munich Re researchers found a significant increase in storms with hailstones larger than a penny in diameter between 1979 and 2016 in central and southern Europe, causing higher losses during that period.

.. A 2015 study from professors at Princeton University and the Massachusetts Institute of Technology found the warming planet is increasing the chance that a major hurricane could enter the Persian Gulf, home to hundreds of billions of dollars of petroleum equipment and assets.

Such cyclones periodically hit Oman and Yemen but have never been observed in the Persian Gulf, climate researchers say. The researchers found that, with new conditions due to warming, some cyclones could enter the Gulf in the future and could also form in the Gulf itself.

.. A 2013 study in the journal Nature projected average flood losses for the world’s 136 biggest coastal cities could rise from $6 billion a year in 2005 to $52 billion a year by 2050 due to increased population and development. When taking climate change and a sea-level rise into account, flood losses could exceed $1 trillion a year by 2050, the study concluded, unless the cities invested about $50 billion annually in adapting.

.. But Hurricane Harvey, which hit Texas in August 2017, spent weeks absorbing 33 trillion gallons of water, according to the National Oceanic and Atmospheric Administration. It dumped more than 60 inches of rain and caused tens of billions of dollars in flood damage.

.. The probability of a Texas storm dropping about 20 inches of rain was about 1% a year between 1981 and 2000, but will likely increase to 18% a year by 2100

.. Increased flood damage also presents an opportunity to insurers. As more regions become exposed to flooding, insurers expect the market for flood insurance to grow.

.. Allianz, one of the world’s largest insurers, says it sold the retail business of U.S. insurer Fireman’s Fund Insurance Co. in 2015 in part because climate change is increasing the risk of losses to coastal homes in California and Florida.