Where are the insurance regulators ? (capitalism, 2009, credit, company)

[HappyTexan]

So I read this article about the Fed and Treasury seeking broader powers..broad enough to shut down any "financial" company.

Now AIG is an insurance company; granted it does more but it is in effect an insurance company. So where were the regulators ? Didn't anyone check the books to make sure the company was on the up and up.
And if they traded..then why didn't the SEC step in ?

There are layers of regulators who could have caught this. No one is being called out and hauled off to court and trial. Instead the government is saying "we want more power".

Something's not right here when the government has to interfer in American capitalism. If it's broke, then fix it - don't take it over.

Obama administration seeks powers to shut firms like AIG

[cdelena]

Big issues to consider...

1) Most insurance is regulated at the state level.

2) Although AIG said it was selling insurance with Credit Default Swaps (CDS), these derivatives were (thanks to Congress) unregulated and tradable so these setup a situation where traders could bet and leverage bets on moves in the economy.

3) Most financial regulators still do not understand what happened and stood no chance to steer this situation over the few years it rapidly developed.

Congress was lobbied by financial traders to allow derivative trading in an unregulated environment that permitted uncontrolled leverage. Many people got out with billions before the collapse. If Congress would have restricted trading on CDS's to only the principal parties it may have limited these to function more like insurace and avoided much of the issue.