Former American International Group chairman and CEO Maurice “Hank” Greenberg called the intervention by the federal government in the company a “nationalization” in a Washington public appearance on Thursday.
In a feisty, 90-minute monologue, Greenberg also said he wouldn’t have allowed the notorious AIG Financial Products division to collateralize the purchase of almost $80 billion worth of securities backed by mortgages of various quality through use of its life company reserves.
In his remarks, the 87-years young Greenberg took on the company, Eliot Spitzer and the regulatory environment.
For one thing, noting that his successor, Martin Sullivan, was fired over the telephone by then-Treasury Secretary Henry Paulson in 2008, Greenberg said he declined to talk to Paulson when they saw each other during a recent Washington event.
When approached by Paulson, he would only tell him, “Read my book,” Greenberg said.
The occasion for Greenberg’s appearance was to tout the two-part book he has written about AIG, “The AIG Story.”
He currently is CEO of the company that was the predecessor of AIG, C.V. Starr Co., founded in China in 1919. He took it back after going to court with AIG.
He said Starr does business in a number of foreign countries, but doesn’t currently write or broker life insurance products.
He declined to go into detail about the decision of AIG’s current management last month not to join in his lawsuit against the government.
He said the federal government could have helped AIG absent the “nationalization” that he said occurred, whereby the government took a 79.9 percent stake in the company in September 2008 in exchange for $85 billion in cash.
But, he noted, after rejecting joining AIG in its suit seeking $25 billion against the government in the Federal Court of Claims in Washington, AIG several weeks later did sue the New York Federal Reserve Bank after the NYFed declined to support AIG in its efforts to recoup $14 billion lost on mortgage-backed securities (MBS) issued by Countrywide, later taken over by Bank of America. That suit was filed in early February in New York state court.
Greenberg said that AIG had had assets seized twice, in Iran and Pakistan, but had won settlements in the World Court that reimbursed the company.
“We were nationalized in the United States, and that’s the reason we’re suing, as a major shareholder, to get compensated,” he said.
In questioning later, Greenberg also said AIG did not participate in the derivatives business to anywhere near the extent it did after he left in 2005.
“We understood how to manage AIG Financial Products,” he said. AIG got into trouble after counterparties to the credit default swaps (CDS) sold by AIG Financial Products demanded collateral as the value of the MBS declined, and it became difficult to raise cash. AIG Financial Products sold $2.77 trillion worth of CDS, and the NYFed provide cash and the government’s support as new management wound down the huge speculation in MBS by AIG through its London-based Financial Products unit.
“We had an enterprise risk management structure” before ERM was conceived, he said. He also said that during his tenure, AIG knew every day how much risk was outstanding.
“We wouldn’t have been in that position had I been at the company,” he said. “That just never would have happened.”