Bernanke’s angry about AIG, not ready to look into the future

I don’t think the government will show us the future of the economy, and maybe that’s just fine:

Mr. Bernanke defended the latest government injections into AIG — putting the total commitment at more than $170 billion — and said the actions would help stabilize the firm and carry out spinoffs and sales of noncore units.

“We don’t know for sure what the future will bring. We don’t know how the financial system will evolve or how the economy will evolve. But I do think that this does give us the best chance both to achieve financial stability and as well to ultimately recover most or all of the investments that the public has made in AIG,” he said.

It is not clear to me how nation-states will be able to justify allowing banks to merge to the size of AIG in the future. Companies of that size are so big, the government appears powerless to stop them, and yet that same government ends up responsible for keeping them solvent in the face of disastrous business decisions:

“AIG exploited a huge gap in the regulatory system. There was no oversight of the financial-products division. This was a hedge fund, basically, that was attached to a large and stable insurance company, made huge numbers of irresponsible bets, took huge losses. There was no regulatory oversight because there was a gap in the system.”

This isn’t a moralistic forecast, but a practical one – what smart country would allow this situation to be repeated in the next 50 years? What investor would risk his capital in the same manner? We won’t have to wait for some government to outlaw this behavior; capitalists will take the lead by being more skeptical about investments.

More importantly: Bernanke claims he has no idea what the future will bring. That’s OK – it’s our job anyhow.