AIG, instead of suing those who bailed them out, should sue those who got them in problem, namely the bank regulators.

Sir, Tom Braithwaite reports that “AIG considers suing US over bailout terms” January 9, something that sounds indeed a bit surrealistic.

Basel II’s 8 percent basic capital requirement for banks allowed a 12.5 times to 1 leverage of bank equity. But it could be reduced to a minimal 1.6 percent, pushing up the allowed leverage to 62.5 to 1, if the bank exposure could be construed as guaranteed by something possessing an AAA rating.

Therefore, had bank regulators not turned the AAA-rating of AIG into an amazing magical capital requirement for banks shrinking machine; something which created an insatiable demand for AIG's credit default swaps, absolutely nothing bad would have happened, as even the whole 2007-08 financial crisis would have been avoided.

Therefore, if the AIG board absolutely must sue someone, because it feels that is the only way it can discharge its responsibilities, according to current traditions, then instead of suing those who bailed them out, they should sue those who got them in problem, the bank regulators.... and perhaps even the US tax-payers would join them in order to turn it all into a class action.

Please let us learn instead and not believe more in the pure blessings of using credit rating agencies

Sir, Gillian Tett ends her “Confidence in CDO rating system showing signs of strain”, June 15, with “Let us hope that the rating agencies and regulators can find a way to make us true believers again” though what we really should be learning is not to believe more in the possibility of a system whereby through the use of some few designated rating agencies we think we can help to direct the world’s financial flows without setting it up to some dramatic systemic risks. Would not using credit rating agencies to more bank crisis and other problems? Perhaps, but that way we would at least vent the system and not allow for the systemic accumulation of risks that can only build up to a truly horrendous explosion. By the way since in these discussions there is mostly a mention of the credit rating agencies when they miss by giving a too high rating, let me also remind you of their equally intrinsic and real cost when they give a too low rating. Any credit not given because of a bad rating, could in, sys fact be the best opportunity missed the world has ever seen.