This knee-jerk response is one of the reasons I find this site amusing. Check your facts – it was the NY INSURANCE DEPARTMENT that allowed insurers to provide credit protection via credit default swaps. In 1998 the NY Insurance Dept agreed to permit an insurer to provide credit protection through transformers (it is interesting that they allowed insurers they regulate to do this indirectly (through the transformer) when they would not allow insurers to do this directly, but that’s a separate discussion – also interesting that the NY Ins Dept has removed that opinion from its website, but you can obtain references to this action on other internet sites).
The way the transformers work: the insurers set up a SPV (e.g., AIG Financial Products) that enters into ISDA contracts (credit default swaps) and then they insure the SPV’s exposure (hence the concern about the solvency of the underwriting companies). My point: insurance regulators (and state regulation) are to blame as well.
Using the passage of Gramm Leach Bliley and the repeal of Glass Steagall as an excuse is flawed at best (btw – GLB explicitly kept McCarran Ferguson intact – in my opinion, a big mistake). Blaming federal regulation and praising state regulation without knowing the facts is wrong as well. The entire financial regulatory system has failed us, in part by being so hung up on industries (banking, insurance, securities) and ignoring the substance of what these companies do. We don’t need more regulation, we need better regulation. Its true that certain insurance lines (homeowners, auto, property risks) are better regulated at the local level, but if these sophisticated companies choose to engage in complex financial instruments (and put the entire entity, including the underwriting companies) at risk, they need broader oversight.
$58 trillion in notional value (face value) We don’t need more regulation, we need better regulation.The entire financial regulatory system has failed us. AND WITH THAT LETS GIVE THEM MORE MONEY BEFORE WE FIX THE PROBLEM.
Why doesn’t the public hear more about this $58 TRILLION problem. Very few people I have talked with, outside of the insurance industry, even know what a credit default swap is, much less the size of the problem.
I guess this is another problem the taxpayers around the world to pay for.
They should all go to jail. Specifially naming them “Swaps” so there would be no regulation is a crime! If a smaller firm had done this they would be looking through bars right now.
They shame the entire industry… and collect millions.
To take down a company the size of AIG took some real greed. Madoff has nothing on these guys!
Why arent there any questions regarding Goldman Sachs obtaining TARP funds then double dipping and collecting all their losses from troubled assets from AIG.
Then Goldman came out this past week and said because we are doing so well we will be able to pay back our loan sooner. WE WANT IT NOW..
I cannot believe that no where in the stock information I received when I bought AIG years ago was any mention of Trilliions of dollars in potential liability that they had assumed in the financial area. Property and liability losses assumed were covered by liquid or semi liquid assets overseen by insurance departments. This scam had no coverge i could see and was not disclosed anywhere I could see. We little guys are the suckers
The real cause of this whole banking collapse was the repeal of Glass-Steagall Act of 1933. Glass Steagall was repealed in 1999 by the Gramm-Leach-Bliley Act, signed by President Clinton, that gave the banks an unregulated financial market to plunder! Insurance people look for a huge regulatory agency to oversee all lines of insurance.
58 Trillion, and here I thought it was 53 Trillion. Anyone with some knowledge in economics should clearly see what’s going to happen. They will monetize the debt and print whatever amount of money needed to hold this house of cards together. The end game is hyperinflation of the dollar and probably a new world currency. Buy Gold.
The system of State regulation of Global insurance products leaves huge gaps in oversight. Where were the rating agencies such as A M Best when all this was going on?!
AIG/AIU/IOU is the poster child for Federal regulation of the insurance industry.
Federal regulation of insurance is NOT the answer. The Feds screwed this up. That’s why AIU is able to exist, it was strong because the state made sure the insurance part was strong.
CDS’s are NOT insurance, the are bets. The answer is the elimination of the “cross-over” entity. Let insurance be insurance and banks/financial institutions be that. Never the twain should meet.
The state(s) did its job, leave the Feds out of it!!
This knee-jerk response is one of the reasons I find this site amusing. Check your facts – it was the NY INSURANCE DEPARTMENT that allowed insurers to provide credit protection via credit default swaps. In 1998 the NY Insurance Dept agreed to permit an insurer to provide credit protection through transformers (it is interesting that they allowed insurers they regulate to do this indirectly (through the transformer) when they would not allow insurers to do this directly, but that’s a separate discussion – also interesting that the NY Ins Dept has removed that opinion from its website, but you can obtain references to this action on other internet sites).
The way the transformers work: the insurers set up a SPV (e.g., AIG Financial Products) that enters into ISDA contracts (credit default swaps) and then they insure the SPV’s exposure (hence the concern about the solvency of the underwriting companies). My point: insurance regulators (and state regulation) are to blame as well.
Using the passage of Gramm Leach Bliley and the repeal of Glass Steagall as an excuse is flawed at best (btw – GLB explicitly kept McCarran Ferguson intact – in my opinion, a big mistake). Blaming federal regulation and praising state regulation without knowing the facts is wrong as well. The entire financial regulatory system has failed us, in part by being so hung up on industries (banking, insurance, securities) and ignoring the substance of what these companies do. We don’t need more regulation, we need better regulation. Its true that certain insurance lines (homeowners, auto, property risks) are better regulated at the local level, but if these sophisticated companies choose to engage in complex financial instruments (and put the entire entity, including the underwriting companies) at risk, they need broader oversight.
$58 trillion in notional value (face value) We don’t need more regulation, we need better regulation.The entire financial regulatory system has failed us. AND WITH THAT LETS GIVE THEM MORE MONEY BEFORE WE FIX THE PROBLEM.
Why doesn’t the public hear more about this $58 TRILLION problem. Very few people I have talked with, outside of the insurance industry, even know what a credit default swap is, much less the size of the problem.
I guess this is another problem the taxpayers around the world to pay for.
They should all go to jail. Specifially naming them “Swaps” so there would be no regulation is a crime! If a smaller firm had done this they would be looking through bars right now.
They shame the entire industry… and collect millions.
To take down a company the size of AIG took some real greed. Madoff has nothing on these guys!
It starts at the TOP. You don’t think Hank knew what this division was doing?
I have been told that this division was around 25 people. Amazing 25 people can bring down the worlds largest insurance companies.
KEEP THOSE SHAREHOLDERS HAPPY AT ALL COST!!!!
GREED KILLS!!!
Why arent there any questions regarding Goldman Sachs obtaining TARP funds then double dipping and collecting all their losses from troubled assets from AIG.
Then Goldman came out this past week and said because we are doing so well we will be able to pay back our loan sooner. WE WANT IT NOW..
I cannot believe that no where in the stock information I received when I bought AIG years ago was any mention of Trilliions of dollars in potential liability that they had assumed in the financial area. Property and liability losses assumed were covered by liquid or semi liquid assets overseen by insurance departments. This scam had no coverge i could see and was not disclosed anywhere I could see. We little guys are the suckers
The real cause of this whole banking collapse was the repeal of Glass-Steagall Act of 1933. Glass Steagall was repealed in 1999 by the Gramm-Leach-Bliley Act, signed by President Clinton, that gave the banks an unregulated financial market to plunder! Insurance people look for a huge regulatory agency to oversee all lines of insurance.
58 Trillion, and here I thought it was 53 Trillion. Anyone with some knowledge in economics should clearly see what’s going to happen. They will monetize the debt and print whatever amount of money needed to hold this house of cards together. The end game is hyperinflation of the dollar and probably a new world currency. Buy Gold.
we get it, that joke was old a long time ago. The guy cant speak. Hes an idiot. We get it. Stop repeating yourself.
The system of State regulation of Global insurance products leaves huge gaps in oversight. Where were the rating agencies such as A M Best when all this was going on?!
AIG/AIU/IOU is the poster child for Federal regulation of the insurance industry.
Jane,
Federal regulation of insurance is NOT the answer. The Feds screwed this up. That’s why AIU is able to exist, it was strong because the state made sure the insurance part was strong.
CDS’s are NOT insurance, the are bets. The answer is the elimination of the “cross-over” entity. Let insurance be insurance and banks/financial institutions be that. Never the twain should meet.
The state(s) did its job, leave the Feds out of it!!