[SAJ]

AIG is an insurance company, principally, and as such is subject to all sorts of regulation, state and Federal, including supervisory regulation of investments they make. The regulators simply looked past CDSs, which is -- in retrospect -- hilarious.

Writing a CDS is nothing more, really, than writing a naked put on a debt instrument. When you or I -- or, ftm, Goldman Sachs or Merrill -- write a naked put on anything, we are required to margin the position properly. How the regulators 'thought' (if I may use that word; they clearly didn't think at all) that AIG or any other insuror could write untold stacks of these instruments WITHOUT proper margin requirement is just another indicator of how incompetent the regulators were...and undoubtedly still are.

I should have included CDSs in the original post, sorry.

[Tempest]

So which is it? On one hand you say that their was too much government regulation then you laugh at government incompetence for not enough regulation?

Which is it?