That’s all good,when the failure of the given business only affects that business and damage doesn’t spread.
lets say all banks in US got pretty mortgage insurance from AIG, and now AIG is bankrupt — good they deserve it! Now every single bank is not-solvent, and has to be taken over by FDIC (yes it is extreme example) now do you think FDIC has ability to support every single bank in US at the same time,I don’t think so. Again a financial institution,is not just itself it is all counter parties,and counter-parties of those people,etc.. And the chain never ends if one big guy fails,it pulls down everybody with it, all Firms, ,clients,and employees. Yes its an extremely fragile and interconnected system,a very dangerous system, which doesn’t happen in any other industry it seems.
And no regulation is not communism of socialism unless you are Ron Paul supporter, financial institutions are regulated already FDIC,SEC,FTC,etc.. But non of those regulations really address catastrophic risk.
If every position is hedged,then if company like AIG goes broke you can liquidate its assets and pay to their counter-parties,without having GOV Bailout. I think that is the most capitalistic way to go,personal responsibility.
You like hyperbole and FDIC is socialism.