Who's To Blame For AIG's Failure?

Here's an interesting synopsis about why AIG failed so quickly.

When Lehman Brothers still existed, the bank had around $150 billion in debt. And the Securities and Exchange Commission let hedge funds and other investment vehicles take $365 billion of insurance out on that debt through the use of credit default swaps. It was like buying life insurance on someone you knew was going to die soon.

Now the sellers of these swaps are on the hook for $365 billion. And guess who sold most of the Lehman swaps? AIG.

When the history of this debacle is finally written, AIG will be at the center of the story. AIG sold insurance on hundreds of billions of dollars of assets, with almost no collateral. It, along with Fannie and Freddie, was the primary reason so much credit was created and the primary reason so much credit has been destroyed.

So where was AIG's risk management? Isn't that insurance companies do, manage risk?