In many cases, the problem is that if it did fail, lots of other institutions would almost certainly be wiped out. Imagine that you open a flood insurance offi

In many cases, the problem is that if it did fail, lots of other institutions would almost certainly be wiped out. Imagine that you open a flood insurance office right next to a levee in New Orleans. You could price things rationally, but if there's a flood you're dead anyway, so why not price your insurance low and live it up in the meantime?