Historical Question What Agency Was Responsible For Regulating AIG In Pre-2008?

[Median Democrat]

Was it the SEC? FDIC? Federal Reserve? State of New York?

AIG does not appear to be bank. Most insurance companies are regulated by states, but AIG appeared to be operating more like a hedge fund than your typical insurance company.

What agency regulated AIG prior to its collapse in September 2008? Who fucked up initially?

[JuniperLea]

1. I would imagine...

The Department of Corporations and/or Department of Insurance... both would be in the state where the corporate headquarters reside.

[Median Democrat]

2. Really? A state Department Of Insuance? Eek.

No offense, but it is scary the notion that a state department exercises that much regulatory control over a trillion corporation. I thought the SEC might play some role, but it does not look like your typical security.

[JuniperLea]

3. AIG is multi-faceted

Investment vehicles and insurance policies aren't governed by the same regulations or regulatory agencies.

[Bolo Boffin]

4. It's shared

Office of Thrift Supervision was one, state insurance boards were others.

http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1655fd01-154e-48de-9fd8-2832a68f04d6

Some testimony from Dinallo of NY State Insurance Department and Scott Polakoff of the Office of Thrift Supervision

Remember, though, AIG Financial Products was exploiting a regulatory loophole to sell CDSs. They were also headquartered in London to further gain distance from regulation.

[Median Democrat]

5. That Is The Big Problem - GOP Has Pushed Deregulation While Complexity Has Grown

So, you have this situation in 2008 where AIG is at the center of the financial universe, but no single entity is really accountable for regulating AIG. Its almost as bad as Cheney being in a universe by himself outside of the Executive Department.

The office of the thrift? The NY State Department of Insurance. Neither really sounds like an institution with the resources necessary to oversee AIG. Obviously, in hindsight, they were not up to the task. Worse, the private rating agencies dished out Triple A ratings like they were candy.

This is the real travesty that is being missed. AIG was able to morph into a corporate ponzi scheme that would make Madoff blush insuring trillions of dollars of obligations without the resources to back-up such insurance.

[Bolo Boffin]

10. "corporate ponzi scheme"

Heard about their looming reinsurance problems yet?

http://www.newsweek.com/id/189917

[uponit7771]

11. DING DING DING!!! The Bush admin even "let" the derivative regulations go to the UK. There was NO..

...one tending the ship...big surprise when speaking of the Bush admin.

[Bolo Boffin]

13. Let?

Oh, that sounds tasty. Source?

[depakid]

6. The financial services unit was run out of London-

Making the Britsh agency, the Financial Services Aurhority (FSA) responsible. And they screwed up royally.

http://www.fsa.gov.uk/

[uponit7771]

12. YEAPERS

[sohndrsmith]

7. wait a second. AIG regulated - even in part - by an agency with "Thrift" in its name?? wow...

The irony is almost painful.

I think the initial F/U stemmed from massive de-regulation and opportunism where money was involved - apparently banks weren't the only honey pots...

Good grief.

[amandabeech]

8. AIG was a publicly traded company.

As such, it was regulated by the SEC and was forced to produce audited financial statements every year.

However, the SEC does not regulate what a company does, just comments, with the threat of legal action, on how the company reports what it does.

[sohndrsmith]

9. Apparently, AIG-FP had nothing to do with insurance... and enjoyed too much autonomy:

From the New York Times - September 27, 2008:

"Because it was not an insurance company, A.I.G. Financial Products did not have to report to state insurance regulators.
http://www.nytimes.com/2008/09/28/business/28melt.html?pagewanted=1

Long article but an interesting read. Anyone else remember how strange and freaked Paulson was when delivering his speeches last year? Could there be a connection? Maybe not, but if I were a betting person - Paulson was terrified of something - or knew he was doing/saying something wrong. He was so nervous it was disturbing. Maybe I'm on the wrong track but something seemed off to me...

[Norrin Radd]

14. The Guild of Calamitous Intent