Maurice Greenberg said today that the government effort to bail out American International Group Inc. has failed.
Proceeding as planned and selling the company at this time “would bring the government only pennies on the dollar for their investment in AIG,” Greenberg, the former chairman of AIG, New York, testified today before the House Oversight and Government Reform Committee.
Greenberg left AIG in 2005, after nearly 40 years at the company, in the middle of an accounting scandal.
Rep. Darrell Issa, R-Calif., the highest ranking Republican member of the Oversight Committee, criticized the decision to call Greenberg before the committee, saying he was troubled that Greenberg was the only witness at the hearing.
Greenberg brought with him a “dark cloud which the majority, in its briefing memo, dismisses as ‘not the subject of this hearing,’” Issa said.
Greenberg said during his testimony that it would have been cheaper for the government if it had walled off AIG Financial Products Corp., the company’s troubled derivatives unit, “and provided guarantees to AIGFP’s counterparties rather than putting up billions of dollars in cash collateral to those counterparties.”
“Guarantees would have sufficed,” Greenberg said.
Greenberg said AIG’s problem was a liquidity problem, not a solvency problem.
When a company is facing a liquidity problem, “the goal of government should be to provide temporary liquidity to save jobs and keep the gears of the financial situation operating smoothly,” Greenberg said.
The goal of government “should not be to liquidate large companies that have demonstrated that they can succeed if properly managed,” Green berg said. “It should be to restore them so that they can be employers and taxpayers.”
Greenberg said he would like to abandon the liquidation approach to resolving the problems at AIG and to “focus instead on rebuilding AIG so that it is better positioned to pay back the taxpayer.”
Greenberg defended his management of AIG.