On the Blind Questioning the Blind
From today’s Senate hearing on AIG:
In prepared testimony, one official, Eric R. Dinallo, superintendent of the New York State Insurance Department, denied that his agency was the primary regulator of the insurance giant and maintained that he oversaw only a small portion of A.I.G.’s business — a handful of its insurance companies that are based in New York. The primary source of the crisis at A.I.G., he said, was its financial products division, which handled credit-default swaps, derivatives and futures totaling an estimated $2.7 trillion.
“A.I.G. Financial Products is not a licensed insurance company,” he said. “It was not regulated by New York State or any other state.”
“We were not responsible for the whole securities lending program,” Mr. Dinallo added.
But Richard C. Shelby, Republican of Alabama and a ranking member of the committee, repeatedly needled Mr. Dinallo.
“Are you trying to evade your responsibility?” he asked. “You can claim here today that you have little responsibility if any for all these problems?”
If I may respond on behalf of Mr. Dinallo: “Senator, if you are asking whether I failed to violate the statutory limitations on my authority, then yes sir, I failed. I failed miserably. As I’m sure you’re aware the organization you belong to — Congress — makes laws that regulators like me enforce. And if I may, I’d like to be so bold as to apologize on your behalf for failing to put in place the legal and regulatory structure that would have prevented this from happening.”
Some more confidence inspiring rhetoric:
Senator after senator complained that the bailout of A.I.G. had effectively bailed out A.I.G.’s many counterparties, and that the Fed had refused to reveal who they were. Senator James Bunning, Republican of Kentucky, predicted that before long the Fed would come back to Congress, seeking more money to help A.I.G.
“You will get the biggest ’No’ you ever got,” Mr. Bunning warned. “I will hold up the bill. I will stop you from wasting the taxpayers’ money on a lost cause, because that’s what A.I.G. is, a lost cause.”