Klein Smackdown Watch

A reader who seems to know what he's talking about e-mails:

I enjoy reading your blog and think you are one of the more responsible and honest journalist I have read recently. But this is why I was so surprised by today's blog post on AIG and the approving link to Mary Williams Walsh's article. I would encourage you to re-read it - and focus on what is fact and what is speculation. Every fact quoted in the article supports the position that all of the AIG insurance companies are solvent and will have no problem paying claims, and yet somehow Ms. Walsh is able to imply the opposite. Her main source of information admits to not having looked at AIG's books! The few numbers she does cite (and you repeat in your post) are completely meaningless out of context. It would take a lot more information to show any company this large and complex to be unable to pay claims. The reinsurance structure within AIG is not news at all and has been subject to every form of regulation and oversight possible. Since 2005, all of AIG's reserving has been done twice - by its internal actuaries as well as by independent auditors who have no motive to make AIG's position look better than it is, and who fully understand of all the intracompany profit sharing that exists at AIG. If these reinsurance arrangements posed a threat to AIG's solvency that would definitely have already been revealed.

If you would like to make a case for a federal insurance regulator, please do. I think that is a great idea. But this is a terrible example, because if a federal regulator existed they would find the exact same thing all the state regulators have found - that AIG's insurance companies' assets will never be used for anything other than paying claims, and that they have a larger policyholder surplus than any other insurance company in the world.

Sadly, I believe this is an example of a reporter sensationalizing a story in order to sell papers. This story was on the front page, yet it contained no information that hasn't been publicly available for years. The only thing that has changed is that the letters AIG have become gold for the newspaper industry in a time when newspapers are struggling. But that is no excuse for irresponsible journalism. I was surprised to find this article in the Times, which I normally respect very much, and I am even more surprised that you would call this a "great piece."