[davetufts]

Right, my comments are about "right now", because they reference the article which deals with the situation right now -- specifically firing AIG's management because they are "sucking down" big bonuses.

I contend that the article focuses on one of the symptoms "right now" (bonuses to poor management still running a company); whereas the cause is government intervention. Without that intervention, the "right now" symptoms would not exist, i.e. AIG would not exist.

You bring up the long debacle that led to this situation. However, you fail to mention that our government and the Federal Reserve have been tightly tangled with AIG for a long time. Regarding "multi-decade process", there's plenty of government blame to go around. http://www.lewrockwell.com/rozeff/rozeff253.html

If you're contenting that AIG was insolvent and still issuing insurance, they should have been prosecuted under state fraud laws, not bailed out with billions of dollars.

[jhancock]

insolvent is a tough word. I don't know if it applies as their books are so complex. The problem is that their investments should never have gotten this complex. AIG and others should never have been allowed to underwrite with such volatile investments. Running an investment bank as the back end to your underwriting is a fairly new thing. 20 years ago, Insurance companies were not allowed to do this. I know because I built IT systems for some of the largest insurers. One thing they all had on their radar was the ability to add investment banking and change the rules that enabled them to invest in other classes of assets. They kept chipping away at the rules until they got it.

The root of this problem is simply that insurance is supposed to be backed by securities that are significantly _less_ volatile than the security they are underwriting. If AIG doesn't have the assets to cover their bets, they clearly did not achieve this goal. The big question is why and which parties deserve blame. My money is on multiple parties.