04/03/2010 05:12 am ET Updated May 25, 2011

AIG Insurance Unit Admits To Dealing In Credit-Default Swaps

Ever since the American International Group nearly collapsed, the conventional wisdom has been that the exotic derivatives that drove it to the brink were the product of a lone, unregulated subsidiary in London. The Federal Reserve chairman, Ben S. Bernanke, called the London branch "a hedge fund, basically, attached to a large and stable insurance company."

But the suggestion that A.I.G.'s core insurance business did not dabble in derivatives is not quite true.