🦔A Wall Street Journal analysis published Wednesday found that U.S. life insurers hold $40 billion in bonds graded by Egan-Jones Ratings, a small firm the WSJ found grades bonds one to three notches higher than peer agencies. Egan-Jones is facing an SEC probe and a lawsuit from former employees who say they were pressured to inflate grades. Bermuda's regulator dropped the firm from its approved list in January. The largest holders include TIAA, Mass Mutual, and insurance companies controlled by Dodgers owner Mark Walter, whose debt is tied to a $16 billion federal fraud investigation. My Take Anyone who saw The Big Short will recognize what is happening here. Rating agencies get paid by the bond issuers whose debt they grade, insurance companies use those grades to determine how much money they set aside in reserves, and inflated grades mean insurance companies are undercapitalized against the bonds they hold. Moody's and S&P ran this playbook with mortgage bonds and everyone still remembers how that ended. Egan-Jones is doing the same thing with private credit right now, and most Americans have annuity money or pension money that touches this debt without their knowledge. Federal investigators are already tracing $16 billion in loans that moved through third parties before reaching the books of insurance companies Mark Walter controls, and Egan-Jones graded most of that debt. If investigators confirm the loans were mislabeled to hide his affiliation, the reserves shrink, and the policyholders who paid premiums for decades learn that Mark Walter's TV broadcasting company was sitting behind their retirement all along. The SEC has known about this pattern since 2023 and Egan-Jones keeps rating deals. Regulators typically move only after an insurance company collapses. Hedgie🤗