Journalism in the Public Interest

AIG Versus Greenberg: The War Intensifies

Maurice R. Hank Greenberg (Choi Jae-Ku/AFP/Getty Images)“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.
former chairman and CEO of American International Group (AIG)

  * In 1962, Greenberg was named by AIG’s founder, Cornelius Vander Starr, as the head of AIG’s failing North American holdings.
  * In the 1980s, his extensive foreign connections prompted the Reagan administration to offer him a job as Deputy Director of the CIA, which he declined.
  * Mr. Greenberg is Honorary Vice Chairman and Director of the Council on Foreign Relations and a member of David Rockefeller’s Trilateral Commission. (BOTH CONNECTIONS IN ONE SENTENCE?)
  * Greenberg was both a social friend and client of Henry Kissinger, utilising his consultancy, Kissinger Associates, for advice and operations in a number of countries, particularly in Asia. In 1987 he appointed Kissinger as chairman of AIG’s International Advisory Board.
  * On March 15, 2005, AIG’s board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, attorney general of the state of New York. On May 26, 2005, as part of a series of actions against leaders of large corporations, Spitzer filed a complaint against Greenberg, AIG, and Howard I. Smith (ex-CFO of AIG) alleging fraudulent business practice, securities fraud, common law fraud, and other violations of insurance and securities laws. (THEN SPITZER GETS BUSTED FOR PROSTITUTION)
  * He is a past Chairman, Deputy Chairman and Director of the Federal Reserve Bank of New York Which means he’s friends with Obama’s new buddy Timothy Geithner another former Fed of NY goon.

Mr. Greenberg’s testimony on CSPAN was interesting.  As he tried to improve his own tarnished image by saying that he could control AIGFP management and no one else could, wasn’t he admitting that the company was too big to fail or that he was omnipotent - it was a stretch!  He did make a great point that the knee-jerk reaction by Paulsen and followed by Geithner to pay counter-parties 100% rather than negotiate a discounted price was well made (by I am not privy to all the discussions/negotiations/contracts etc.).

His discussion of how such a large company as AIG could decide which government oversight entity they would align under is one of the issues that legislators need to evaluate as part of their “regulatory reform” .

Given a choice, any company will select the overseer with the least stringent regulations.

I am hopeful that congressional leaders will evaluate all his testimony in light of him trying to improve his own image/legacy…as he did gloss over a number of critical issues.

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