keywords: house oversight committee, aig bailout, former aig ceo maurice greenberg
Synopsis: Appearing before the House Oversight and Government Reform Committee, Maurice "Hank" Greenberg, AIG's chief executive until March 2005, said taxpayers got a raw deal in the largest bailout of the financial crisis. Greenberg, who built Insurance giant American International Group (AIG) into the largest insurance company in the World said he didn’t mismanage the company, but the government did... (read more)
AIG $182 Billion Bailout - Maurice Greenberg Testifies
AIG's business model did not fail; its management did," Greenberg said. He went on to criticize their handling of the Financial Products Division. That division wrote the notorious credit-default swaps that have forced the company to pay more than $50 billion to U.S. and foreign banks.
Greenberg said the payments never should have been made. The financial products group's liabilities should have been "walled off" from AIG, and counterparties should have been given government guarantees instead of being paid full value for assets that now are worth much less, he said.
The swaps are commonly used contracts to insure against the default of financial instruments such as bonds and corporate debt. But they also are bought and sold as bets against bond defaults. Besides forcing AIG's rescue, they played a prominent role in the credit crisis that brought the downfall last year of investment firm Lehman Brothers Holdings and Merrill Lynch & Co. selling itself to Bank of America Corp. "I think they got greedy," Greenberg said. "You would have thought that somebody, whether the president CEO or chairman would have called a halt" once AIG lost its triple-A credit rating.
In essence, AIG lent its credit rating to other companies for a small charge so they could reinvest money spent on securities backed by mortgages and other debt. When it lost that rating, it was forced to put up billions in collateral.
Refusing to accept blame for the failure to offset risk on billions of dollars in derivatives the company sold during his 38-year tenure, Greenberg said the division's most dangerous derivatives portfolio doubled in size in the nine months after he left.
