The extent to which AIG had gotten into this risky business was a total shock at even the highest level of federal regulators in Washington, who were obviously asleep at the wheel.
So, why is Congress not now talking about putting these things on an open and public exchange?
They're not talking about it because these banks make enormous amounts of money facilitating such trades, creating these swaps (as these insurance policies are called) for their customers, allowing them to continuously trade while taking a healthy cut as the middle man. They don't want transparency. They make more money from opacity. They don't want people to be able to see what these insurance polices are trading at, because at the moment they do that, the spreads would narrow, and their huge profits would be greatly reduced. This kind of trading in the dark provides an enormously profitable (if risky) business for them. And they are still gambling that they will have the taxpayer to bail them out again if things should go awry. After all, they're still "to-big-to-fail."
Could this business, unregulated as it continues to be, without the transparency it cries out for, really bring us down yet again?
Absolutely. As already stated, what has been proposed is to make these risky insurance policies be traded through some kind of clearinghouse. But perhaps not all of the policies, only the most simple of them, would have to contend with that clearinghouse. The more exotic of these "swaps' (where I make an agreement with you to buy or sell something, some stream of income), those might not have to be done via a clearinghouse. So, you're still going to have an enormous amount of this stuff trading behind the curtain, without the knowledge of any regulatory agency.