Accountability for financial failure and negligence should fall on legislators, board rooms and individuals rather than policies and packaging.
As brigands stretch regulatory, fiduciary and ethical restraints beyond sensibility, the blame is too often placed on inanimate systems and procedures such as Derivatives or Swaps.
It’s not enough to escape liability under stupidity, greed or human nature repeating that “players in the Wall Street crisis did not fully understand the investments their own firms were making” because this is the indictment precisely.
Seriously now, because Democracy is History!
If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?
Sadly without adequately naming names, Metafilter has posted a few explanations about the collapse of AIG:
How AIG fell apart is a good article giving an overview of Credit Default Swaps (CDSs) and the role they played in AIG’s struggle. CDS issues are a crisis that quite a few saw coming just a few months ago and one that was discussed here then, although AIG was thought be a special “safe” case among CDS issuers.
Indeed it now seems that AIG’s particular problem was that it had failed to hedge the CDSs they issued with CDSs acquired from other institutions, presumably on the premise that they were insuring assets too safe to fail.
Also included the $85B bridge loan made to AIG might not be enough to save the insurer.
Bank governors worldwide have made ready $200 billion for the struggling bank sector in only a few days while, without squeezing his lauded private sector friends further, the Bush Administration is tapping taxpayers for approximately $600 billion.
There are names and addresses of laissez-faire regulators asleep at the wheel while padding their lobbyist and donor allies. Many are on a ballot.
Hoist them on their petard and choose them away.
[wiktionary] He has no one to blame but himself, ‘hoisted by his own petard’.