We suffering taxpayers were treated to some rare good news this week, when the U.S. Treasury sold the last of its holdings in AIG, earning a cool $23 billion profit. Not bad for a risky corporate turnaround.
But there to rain on the parade was Hank Greenberg, the former CEO of the insurance giant, who has spent the past four years on a one-man crusade to turn back the clock and recover the millions he lost. He portrays himself as the Man Who Could Have Saved AIG, and it makes for a good story. But is the media letting him off to easy?
Hardly a news story on AIG passes without a quote or a mention of Maurice “Hank” Greenberg, former CEO of AIG. Here is a portion of his appearance on Bloomberg television with Betty Liu, when the Treasury’s sale of its last AIG shares was announced:
Liu: Hank, four years, and finally the government is out of AIG. Is that too long for you?
Greenberg: It did not have to be that way.
Liu: Right, as you have said over and over, shareholders got the wrong end of the deal. But taxpayers have made money off of this bailout.
Greenberg: Well, I am sorry, I do not agree with that. Let’s talk about what the options were. I had been out of the company for almost four years when all of this blew up. The government used AIG as a backdoor bailout for companies like Goldman Sachs. They certainly could have opened the Fed window for AIG, as they did for others. The Fed could have guaranteed AIG’s financial products as they did for others. That would have reestablished the AAA rating for AIG. They would have recaptured collateral that they had posted with others. So it seems to me they had a design to use AIG as a backdoor bailout. There was nobody at the company at the time who had the courage or wisdom to fight what was being done.
Asking if the bailout was necessary or ultimately successful are the wrong questions. The better questions are why Greenberg built such a house of cards in the first place and why he believes he played no part in its ruin.
Greenberg is quick to point out that he left the company “nearly four years” before its collapse (actually it was a little more than three, if you start with his departure from the AIG board in June 2005, but who’s counting). But after leading the company for nearly 40 years, how can he blithely skirt responsibility for its problems?
After all, he led AIG’s foray into derivatives and securities lending, two businesses that were at the core of the disaster. And he skillfully exploited the regulatory gaps that allowed AIG to operate like a bank without being subject to bank capital and accounting rules or Fed oversight.
Let’s also remember that Greenberg was forced to resign as CEO over an accounting scandal, in which he ultimately was forced to pay $15 million in a settlement with the SEC. (Yes, Eliot Spitzer was aggressive but that doesn’t change the facts.)
So with all this baggage why does Greenberg keep showing up in the press like an unwanted guest at a holiday party?
For one thing, he’s available, and AIG is a big company that often does newsworthy things. Thanks to his control of CV Starr, he’s also an AIG shareholder, though a smaller one than before the rescue. And he’s an octogenarian with plenty of fight, which you don’t see on daytime television too often.
But the main reason is that his media appearances bolster his personal reputation and help his lawsuit against the bailout, which is still alive despite a recent setback.
He’s eager to be seen not as the tainted architect of a giant insurer that nearly wrecked the world’s financial system, but as the knowing sage whose guiding hand could have prevented disaster if only he had been there.
It’s easy to forget how dire things were in the autumn of 2008. Could Greenberg have cut a better deal for shareholders? That’s doubtful. This was a frantic rescue at the peak of the financial crisis, and no CEO of a failing firm had a meaningful say over their institution’s fate. Not Dick Fuld at Lehman. Not James Cayne at Bear Stearns. Hank Greenberg would have been treated no differently.