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?