AIG CEO Robert Benmosche put himself at odds with most of the financial services industry and many members of Congress Thursday when he said that higher capital standards are justified for financial institutions given what happened in the 2008 financial crisis.
He implied that AIG will be regulated going forward under the Basel III capital standards being pilloried by most financial services industry officials, either as a systemically significant institution (SIFI) or as a savings and loan holding company.
“The regulators are not going to be criticized the next time around,” Benmosche said. “They’ll make sure we have enough money, and that’s just the way it’s going to have to be,” he said.
Benmosche made his comments in an appearance on CNBC following release of the company’s fourth quarter earnings.
At that point, CNBC anchor Maria Bartiromo added that, “Right, because it wasn’t just the CEOs that made bad decisions with the 2008 collapse, it was the regulators being asleep at the wheel. I’m sorry but let’s be honest here.”
“Maria, the fact is that the public is angry, because we made salaries and bonuses and the public wound up having to have the government stand behind us during a difficult period of time,” Benmosche said.
“The regulators are absolutely committed to make sure no matter what happens in a dire circumstance, every financial institution can survive it without the aid of the government.”
The common thread in his comments was that because of its problems, AIG expected higher scrutiny from its regulators and rating agencies and that it was adjusting its business operations to account for that.
“I can tell you now, the door is closed on AIG and the crisis,” Benmosche said.
“So, what you’re going to see going forward, the only big thing we’re dealing with is International Lease Finance Corp., the aircraft leasing unit, most of which is being sold to Chinese investors.
“… as long as we keep growing our earnings, de-risking the company, cutting expenses and continue to do appropriate capital management, I think this is a good story for several years to come,” Benmosche said.
The company reported operating income of 20 cents a share, far in excess of consensus analysts’ estimates of a loss of eight cents a share.
Benmosche also said that AIG managed a profit once charges were taken out for estimated costs of paying claims for Superstorm Sandy, cited by Benmosche as the “largest catastrophe in the U.S.”
The report indicated that the company’s net premiums in its Chartis property and casualty business were $6 billion, in line with expectations.