The use of “hedge fund” as an epithet is more common on the other side of the Atlantic than on the lips of the U.S.’s financial regulators. Yet when asked what made him angriest about the ongoing financial crisis, Federal Reserve Chairman Ben Bernanke branded the American International Group with the scarlet letter, a term also bandied about by Treasury Secretary Timothy Geithner.

“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke said at a Senate hearing yesterday. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”

The insurance giant, which was effectively nationalized and bailed out by the federal government in September, “made huge numbers of irresponsible bets, took huge losses; there was no regulatory oversight because there was a gap in the system,” Bernanke said.

If AIG is indeed a hedge fund, it may well be the worst in history: The insurer posted a $61.7 billion loss in the fourth quarter, the largest quarterly loss in corporate history, bringing its annual loss to almost $100 billion. AIG shares have lost more than 99% of their value since last spring.

Bernanke added that regulators should be given the power to bar new financial products that may undermine economic stability, such as the subprime-linked securities that helped cause the current meltdown.

Meanwhile, on the other side of the Capitol, Geithner had more tough words for that worst of all things, the hedge fund AIG.

“AIG is a huge, complex, global insurance company attached to a very complicated investment bank, hedge fund that was allowed to build up without any adult supervision,” he told the House Ways and Means Committee.