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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Mike M2 who wrote (245633)4/26/2010 1:40:01 PM
From: carranza2Read Replies (1) of 306849
 
The notion that AIG would have gone under if it had not been bailed out is not correct. It is a bit more complex than that.

The insurance aspects of AIG's business are regulated by the various state insurance commissioners who by and large do an excellent job. Companies like AIG are required to keep their reserves in liquid, stable investments. You can be assured that if these commissioners had to deal with the crazy risk that AIG Financial Products was taking on, it would have been shut down long ago.

The swaps AIG Financial Products sold to outfits like GS was unregulated 'insurance'. It simply used AIG's great rating to take on crazy counter-party risk. If it had been put in receivership, I question whether the entire AIG operation would have also gone down. Maybe, but the fact that the state insurance commissioners play a big part in structuring the insurance busines so that insurers can pay claims suggests that there would not have been an economy-paralyzing insurance problem.
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