I am utterly amazed. First Fannie Mae and Freddie Mac. Then Lehman. Now AIG. AIG? Yes, AIG — the government has taken control of one of the world’s largest insurance companies. Someone help me — my jaw is scraping the floor.

My amazement stretches from the government’s action to AIG’s seemingly utter inability to manage its CDS risks to AIG’s seemingly boneheaded management to an absolute disgust right now with our nation’s financial services system and its after-the-fact regulatory actions.

Let’s start with the deal. Paulson and crew felt as though they absolutely had to rescue AIG or all financial services faced systemic systemic risk. That much is clear. The deal gives the feds nearly 80% of the company. The loan the Federal Reserve has given to AIG is payable at libor + 850 basis points. That puts AIG’s cost of funds at 11.31% today. That’s wicked high. Some online babblers are talking about how the government could make money on this deal. I certainly hope that making money was not even remotely part of the government’s consideration in doing this deal.

How this happened points to AIG’s inability to manage its risks in its financial products division, which sold credit-default swaps. The fact is that AIG’s consumer insurance units are completely well-capitalized. Why are they well-capitalized? Because the law requires it. I don’t think it would be right to credit AIG’s risk management.

Greenberg, Sullivan, Willumstad — they all deserve a piece of the blame. To varying degrees they allow their insurance company, which is supposed to be supremely able to evaluate risk, to allow itself to be swallowed by its risks. Of course, Paulson should have fired Willumstad as part of this rescue. The former CEOs also apparently instilled a corporate culture as honorable as a toothpick. You reap what you sow.

Over the last 20 years, there have been intimations that certain companies were “too big to fail.” Well, now we see that Fannie, Freddie, and AIG were “too big to fail.” In 1901, President Theodore Roosevelt took dead aim at the monopolistic trusts run by JP Morgan and others. Perhaps we need another kind of Sherman Antitrust Act? Perhaps we need a Sherman Anti “Systemic Risk” Act that protects our economy from companies that pose too much concentrated risk, much in the way that the Sherman Antitrust Act protects consumers from the abuses of monopolies? All I know is that I found myself a few minutes ago on INGDirect.com, trying to figure out if I can open a bank account before the markets open to spread my cash around between banks to keep the few pennies I own all covered by FDIC insurance. It has come to this.

As a nation, we need to prevent these types of failures, not react to them. This should be our regulatory mantra. Presumably, the volumes of banking regulation on the books are designed to prevent deep risks to our financial system. The regs didn’t work this time. (I won’t consider at the moment whether enforcement was more lax under Bush, and whether that helped create the problem we are in.)

According to the Chicago Tribune:

To fix the crisis, Paul Volcker, his words scrawled on a yellow legal pad, suggested the government establish a temporary entity with broader powers than what the Federal Reserve and Treasury Department enjoy.

Hey, if it works, great. If WaMu fails — tomorrow is as good a day as any — and on a drive for a carton of milk the average American suddenly drives past a brightly lit WaMu branch with a “seized” sign on its door, the fear of nationwide financial failure will chrystalize. Just behind widespread fear comes the next step in a financial calamity: widespread panic. That’s when even Hank Paulson starts checking INGDirect.com. It might come to this.