Bernanke made his comments at a conference on “Rethinking Finance” sponsored by the Russell Sage Foundation and The Century Foundation.

He says the “insurance operations of AIG were supervised and regulated by various state and international insurance regulators, and the Office of Thrift Supervision had authority to supervise AIG as a thrift holding company.”

However, he adds that “oversight of AIG Financial Products, which housed the derivatives activities that imposed major losses on the firm, was extremely limited in practice.”

Gaps in the Fed's statutory authority to oversee companies in the shadow-banking sector “had the additional effect of limiting the information available to regulators and, consequently, may have made it more difficult to recognize the underlying vulnerabilities and complex linkages in the overall financial system,” Bernanke contends.

The Fed was barred by a provision of the Gramm-Leach-Bliley Act of 1999 from overseeing insurance-holding companies.

Bernanke says shadow-banking institutions that were unregulated or lightly regulated “were typically not required to report data that would have adequately revealed their risk positions or practices.”

He also says the shadow-banking system played a far greater role than the subprime-housing market in making the 2007-2009 economic crisis more serious than the “dot-com” bust in 2000.

Bernanke argues that “…any theory of the crisis that ties its magnitude to the size of the housing bust must also explain why the fall of dot-com stock prices just a few years earlier, which destroyed as much or more paper wealth—more than $8 trillion—resulted in a relatively short and mild recession and no major financial instability.”

He adds, “Once again, the explanation of the differences between the two episodes must be that the problems in housing and mortgage markets interacted with deeper vulnerabilities in the financial system in ways that the dot-com bust did not,” Bernanke said.