- The Washington Times - Friday, April 3, 2009

The man who built insurance giant American International Group Inc. from a start-up to a global behemoth said he didn’t mismanage the company - but the government did.

After weeks of public and congressional outrage over the largest corporate failure in U.S. history, Maurice “Hank” Greenberg, AIG’s chief executive officer until March 2005, said taxpayers got a raw deal in the largest bailout of the financial crisis.

In his first testimony since the government stepped in with the first of four bailouts for AIG, Mr. Greenberg told the House Oversight and Government Reform Committee on Thursday that his leadership team had “nothing to do” with failures that so far have cost taxpayers more than $182 billion.

But he spread blame generously across almost every other party involved in the company and its rescue - including subsequent management, federal regulators and ratings agencies.

An AIG spokesman disputed Mr. Greenberg’s claims and lawmakers questioned the truthfulness of his testimony.

Since taking over the company, the government has left taxpayers with a nearly 80 percent stake “in a steadily diminishing asset” and no good exit strategy, Mr. Greenberg said.

The 83-year-old insurance mogul said he never would have made the disastrous decision to sell hundreds of billions of dollars in guarantees for corporate and consumer debt.

“When I left the company, it was a healthy company,” Mr. Greenberg said, citing its strong earnings and share price at the time. He did not discuss liabilities AIG was accumulating on its balance sheet through derivatives and a securities-lending business.

Mr. Greenberg blamed his successors for all of New York City-based AIG’s problems. He said they recklessly abandoned “comprehensive and conservative” risk management procedures that he and his executive team employed.

“AIG’s business model did not fail; its management did,” Mr. Greenberg said. He went on to criticize their handling of the financial products division, which he said “functioned quite well” under his leadership.

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. Mr. 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.

Besides forcing AIG’s rescue, the group 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,” Mr. 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, Mr. Greenberg said the division doubled in size in the nine months after he left.

AIG spokesman Mark Herr disputed those claims.

The financial products division started selling the most dangerous of those products “under Hank Greenberg’s stewardship and with his express approval,” Mr. Herr wrote in e-mail. “This business ballooned under his watch,” selling almost one-third of those contracts “during the 15-month period immediately prior to his ouster.”

California Rep. Darrell Issa, the committee’s senior Republican, said he doubted Mr. Greenberg’s truthfulness given his involvement in numerous lawsuits related to AIG’s failure. And longtime AIG critic Rep. Elijah E. Cummings, Maryland Democrat, rejected Mr. Greenberg’s finger pointing.

“I’m convinced that the systemic problems at AIG go far deeper than mistakes made in the four years since you left the company,” Mr. Cummings said.

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