Sorry, aside from not regulating AIG’s Securities Lending, there were no major errors in the regulation of AIG for solvency by the insurance regulators.

The insurance regulators had no control over AIGFP, which was the main problem.

Insurers have actuaries. Banks don’t. The actuarial risk models are more robust than the bank models. Insurers had the right to invest in risky mortgages, but given that they are longer term investors, chose not to. I’ve been on both bank risk committees and insurer risk committees — what the insurers do is far more rigorous.

Also, insurers run at lower levels of leverage relative to the riskiness of their business and their funding base. The regulations require it.

The insurers have not captured the NAIC the way the banking industry captured its regulators.

I’m willing to hear criticism here, but your perfunctory comments leave me with little to chew on. If you have something big to say, why don’t you start your own blog and take my post apart as your first post? I mean that in a friendly way. The blogosphere has need of good thinkers, and if I am wrong, show the world. We will all be better off.

1 – Insurance regulatory regime is awful. Worse than banks. The results are worse based on AIG alone.

2 – The reason your loose thinking allows you to believe this… is because this crisis was a mortgage/housing crisis. That is where the spec bubble was. It burst. This obviously affects those closest to the mortgage credit chain most — BSC, LEH, FNM, FRE, WAMU, Wachovia, etc…

Drawing other conclusions is silly.

Term limits are one way of dealing with these. So are elections. Electing judges is not a bad thing.

So, should we elect Fed Governors? No. But there has to be some way to remove control of the Fed from the cadre of bureaucrats and academic economists with their failed paradigms.

Politicians would be better off saying, “We’ve proven that we are no good at managing the economy. Let it manage itself. We will deal with domestic tranquility and defense. Let the courts deal with the rest.”

I would rather the Fed did not exist, but if it does exist, let the terms be short.

All that said, one benefit of the Dodd proposal is that there would be no reason to employ all of the economists at the Fed.

Eventually they would realize?

I find myself rarely disagreeing with you, but as mistaken as *some* elites might be at times, I’ve got to think it would be much worse under some sort of popular vote by the masses. Simply observe the utter disaster that is Congress/the legislative process and the influence of special interest groups, and that legislation is almost always focused on the short-term rather then the long-term. And these are the same people who bought hook, line, and sinker into the tech and housing bubbles thinking trees could grow to the sky, economic reality could be suspended, and that you can always get “something for nothing”. I don’t know. I shudder to think what monetary policy would be like if those responsible for it were subject to popular vote from the “people”. There are very good reasons that Supreme Court justices are appointed, not elected, and that generally speaking the judicial branch is immune from political pandering.