2010 0910 - WSJ - 'Systemic Risk' Stonewall: Some Bailout Questions the Fed Still Hasn't Answered

  • 2010 0910 - WSJ - 'Systemic Risk' Stonewall: Some bailout questions the Fed still hasn't answered  ---  [BonkNote]  ---  [link]
    • [Bonk: Who authored this article?]
  • What could the New York Fed be hiding?
    • For one thing, a clear explanation of why it felt it had to bail out AIG.
    • The story from regulators during the crisis was that credit-default swap counterparties had to be paid lest the financial system collapse.
    • The public became incensed about 100-cents on the dollar pay-outs to big banks.
  • Then last winter, Treasury Secretary Timothy Geithner, who ran the New York Fed in 2008, said the real problem had been AIG's insurance business, threatening average consumers.
  • Writing in our pages in February, former New York Insurance Superintendent Eric Dinallo said that "policyholders would have been protected" in the event of an AIG bankruptcy.
    • That seemed clear enough, but then Mr. Dinallo immediately added that an AIG bankruptcy "would have been bad for those same policyholders."
      • 2010 0202 - WSJ - What I Learned at the AIG Meltdown: State Insurance Regulation Wasn’t the Problem, by Eric Dinallo - [link]  
  • ⇒  So which was it?
    • State insurance regulators and industry analysts have since told us that Mr. Dinallo was wrong when he suggested that policyholders would have suffered.