David Dodd 1:48 a.m., May 18
Why Haven't State Regulators Gone After AIG?
The government has pumped more than $150 billion into bailing out American International Group (AIG), the big insurance conglomerate that has gambled with derivatives, been charged with cooking its books, and admitted that it would not be a going concern without the bailout funds, among many things. States regulate insurance companies, but none has questioned AIG about its activities. San Diego attorney Michael Aguirre on Friday (June 12) wrote Timothy Geithner, Secretary of the Treasury, asking for information on the federal government's possible attempts to influence state regulators to cool their heels. "It has been learned that officials of the U.S. Treasury and state insurance commissioners are holding and have held periodic teleconference meetings on the subject matter of American International Group," Aguirre wrote, asking for information, such as meetings notes, under the Freedom of Information Act (FOIA). "Not an insurance commissioner has taken action against AIG," says Aguirre. "They are doing the opposite -- reassuring policyholders that everything is OK." The New York insurance commissioner tells people that it is against the law for anyone to tell a policyholder to switch from AIG because is in trouble and may not be able to pay claims.
Also on Friday, Aguirre sued the Treasury Department. Several times during May, Aguirre had requested FOIA documents on AIG, but the Treasury has been unresponsive. The documents have not arrived during the time frames in which the government is theoretically obligated to provide them. The requested documents are for a lawsuit that his firm, Aguirre, Morris & Severson, filed against AIG May 21, charging, among many things, that the company had engaged in fraudulent practices that threaten the welfare of insurance policyholders of California.
Says Aguirre, "What appears to be happening is that the Treasury and Federal Reserve seem to be more interested in concealing their failures to properly regulate than to cause an appropriate reorganization of AIG."
Is it also possible that the government knows that AIG is hopelessly broke and policyholders are at risk, and it doesn't want this knowledge to get out? That is my own question.