If you pay taxes, here's a helpful story that suggests that there are people out there actually looking after your and your clients' interests. The article is by Mark Pittman, James Sterngold, and Hugh Son from Bloomberg News. It's about the House Committee on Oversight and Reform and its efforts to determine whether taxpayers are being well served by the massive amount of public aid to AIG AIG and its counterparties when the firm nearly collapsed last year. I was happy to see the work of the committee and its chairman, Edolphus Towns, a Democrat from New York. I've also been happy to watch Bloomberg's coverage of this material over the past year or so. It's nice to see examples of the Fourth Estate doing its job.   

The insurance world has long been aware of a phenomenon called "moral hazard." Once insured, people may take more risk than they otherwise would have taken. Insurance companies are not blind to this risk. They price it into their policies, knowing that losses will likely be higher than they would have been if clients did not have insurance policies. 

In fact, the insurance business has long made an interesting distinction between "moral hazard" and "morale hazard." If people simply take more trips or drive a little less carefully because they have auto insurance, morals aren't necessarily at risk. But if an incentive arises to actually cause the loss being insured against, moral hazard can arise. Ever hear of the $30,000 garage rubbing up against a $50,000 insurance policy? Sometimes, fires can start suspiciously.   More 

In an interview this week with Bloomberg's Christine Harper, Goldman Sachs GS chief financial officer David Viniar said that he was "mystified" by heightened interest in Goldman's relationship with American International Group AIG.  I'm a bit mystified why he's mystified.   More 

As the financial crisis flowered in recent years, disclosure issues have gained greater attention. Some of the worst damage came in the structured finance area, where complex derivatives based on complex securities helped bring down one of the largest private insurance enterprises in the world. 

With deteriorating returns and growing illiquidity in markets for complex instruments, the debate over "mark-to-market" accounting has gained greater intensity. Some critics are laying the severity of the financial crisis in part on requirements that institutions mark illiquid positions down to unrealistic "market" values. Meanwhile, some critics of these critics say that blaming mark-to-market accounting for the financial meltdown is a bit like blaming the National Weather Service for Hurricane Katrina.   More