AIG Versus Greenberg: The War Intensifies
“Let me be clear: AIG’s business model did not fail—its management did.”
Thus did Maurice “Hank” Greenberg end his written testimony (PDF) before today’s congressional hearing into the AIG rescue.
There is now a full-blown public relations war between the ailing insurance giant and its founder and former CEO, Greenberg.
Greenberg was ousted in 2005, following investigations by then-New York Attorney General Eliot Spitzer. Since the first AIG bailout in September 2008, Greenberg has tried to cast himself as a potential sage and savior when it comes to the increasingly expensive question of what the federal government should do about the company.
Greenberg’s attacks on company management provoked a counterattack from AIG, which last night sent reporters a three-page “fact sheet” detailing allegations, a history of legal disputes and other instances of what the company sees as Greenberg’s mischaracterizations of his management of AIG.
In his prepared testimony, the 83-year-old Greenberg calls for what would be bailout version 5.0. Most significantly, under his plan, the government would wait 20 years—instead of the current five—for AIG to repay a $42 billion loan from the Treasury Department.
Greenberg blames his “successors” for bungling AIG’s finances in two areas. One area was run by the now-infamous Financial Products division that sold credit default swaps—a form of insurance on financial instruments. The other involved a program that loaned out securities held by insurance companies. Together the two business lines have cost taxpayers about $100 billion to terminate.
Much of the bailout cash went to AIG “counterparties”—the American and foreign banks at the winning end of AIG’s bad deals. Greenberg condemned paying those partners 100 percent of what was owed. Instead, the company should have negotiated a lower payout, he said.
“These cash payments to CDS counterparties should never have occurred,” Greenberg said.
Now, he said, the companies should be enticed into an arrangement whereby they would become investors in AIG, which, claims Greenberg, would give them an incentive to see AIG succeed.