When the AI Bubble Bursts, Who Will Be Left Holding the Bag?[0]
> A new paper [1] making a stir in the financial press spells out the dangers to which private equity-owned life insurance companies are exposed by private credit funds with large portfolios of loans to software and AI companies. It’s a complicated story that could have enormous consequences.
> Pranjal Drall and Andrew Granato, the report’s authors, argue that some of these insurance companies could become insolvent if these loans crash. And an unanticipated consequence of a 60-year-old rule that protects insurance company policy holders from losing all of their life insurance benefits or annuity payments could leave taxpayers holding the bag.
Paper:Private Credit's State Backstop: How Private Equity Socializes Risk Through Insurers [1]
“Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.”
SURPRISE! Joe and Jane taxpayer. [2]
When the AI Bubble Bursts, Who Will Be Left Holding the Bag?[0]
> A new paper [1] making a stir in the financial press spells out the dangers to which private equity-owned life insurance companies are exposed by private credit funds with large portfolios of loans to software and AI companies. It’s a complicated story that could have enormous consequences.
> Pranjal Drall and Andrew Granato, the report’s authors, argue that some of these insurance companies could become insolvent if these loans crash. And an unanticipated consequence of a 60-year-old rule that protects insurance company policy holders from losing all of their life insurance benefits or annuity payments could leave taxpayers holding the bag.
Paper:Private Credit's State Backstop: How Private Equity Socializes Risk Through Insurers [1]
[0] https://cepr.net/publications/when-the-ai-bubble-bursts-who-...
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=7152239
[2] Wilhoit's Law.
“Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.”
https://pylimitics.net/wilhoits-law/
Safety net for the wealthy only. TARP, anyone?