Wednesday, December 19, 2007

Insure Yourself

It's hard to get a full understanding of this story. Essentially it's preferable for Big Shitpile to bail out their insurance company - essentially cover their own losses - and keep pretending they actually have insurance than to admit that their insurance company doesn't actually have any money to pay claims. This is due to the combination of exploitable accounting rules and reserve requirements for banks. If they have to admit that their fantasy income isn't real then they might be technically below reserve requirements.