AIG was a hedge fund attached to a stable insurer, says Bernanke

It's distressing to me that Ben Bernanke doesn't know what's going on. Imagine: the US government is throwing more than $100 billion into this company, and neither Bernanke nor anybody else holding the purse strings can bother to educate themselves with what happened. AIG lost the money principally through selling CDS protection on super-senior positions. At the time, these positions appeared to carry very little risk. The real explanation (why say blame?) for the ability to generate such great losses relative to capital is that the dealer counterparties accepted the unsecured AIG counterparty risk (having apparently no CSA protection at the original AIG credit ratings). Why would the dealers do that? It was simply bad judgment in a competitive industry. My larger fear is that Bernanke and the other politicians and regulators have a similar lack of understanding of most important issues.