First, a great post LTB. Bringing a significant event, and its implications, to the board. Well done.

I've been following the events leading up to this for well over a year. It began when I realized that regulation lack of oversight in how PE investments of insurance capital flows in their businesses had finally attracted NAIC regulator's attention. And that they had passed new regulations, coming into effect in 2027, but requiring PE firms to reexamine and report such investments leading up to that period. That's been going on for two years now.

Basically there are two fundamental questions. First is if prices are being set in a fair market negotiation, or being influenced by PE firms being involved in both ends of the exchange - and maybe being hidden. The second is how the risk of such loans is being established. Very often, the risk ratings are being done by second or third rank opinions, or even internal valuations by the PE firms. How realistic are these?

That's very important. Because the risk level is established by the Required levels of Risk Based Capital (RBC) supporting the loans from owned insurance firms to others. That might range from 4.5% for some loans to 30-40+% to others depending upon risk. PE firms naturally want their loans to be rated at lower risk levels.

So, in my simplified view of things, there are the two major issues stated above? If the prices are not justified, they provide an easy way to move money from one end to the other. If the risks are not accurate, they provide a way to move money from RBC to available for other uses.

These are the issues now being addressed by upgraded regulations, also including offshoring transactions to favorable tax havens. And not only disclosures but establishing the authority of regulators to do their own risk evaluations, and impose them on the PE firms.

This is causing a lot of turmoil in PE - indicated by both a lot of short selling and a lot of activity to build capital for existing loans - or dump them.

There's a lot of smoke, but only now are specifics emerging - e.g. sell the Lakers, maybe Chelsea for Mark Walters. But the restructuring activities are taking place across the industry - depending upon how they've behaved in past actions.

How much this may impact the broader economy depends upon what is uncovered and in what amount. The Dimon worry.

Stay tuned. Large new capital needs could roll back outside the PE industry and result in both economic problems and purchase of assets from PE firms. I'm betting Ajit has been on top of this for opportunities. I've stated before I don't think BRK is either involved or impacted.