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Goldman’s ‘Change in Culture’ Hurts Clients, Greenberg Says

Maurice
Maurice "Hank" Greenberg, former chairman and chief executive officer of American International Group Inc., during an interview in New York. Photographer: Scott Eells/Bloomberg

March 15 (Bloomberg) -- Maurice “Hank” Greenberg, the former chairman of American International Group Inc., said Goldman Sachs Group Inc. had a “change in culture” that made the securities firm less responsive to clients.

“You didn’t have investment bankers running the firm, you had traders running the firm” after Goldman Sachs went public, Greenberg told Bloomberg Television’s Betty Liu today in an interview on the “In the Loop” program. “And a trader has a short-term memory, and a short-term look at things, and that change really has changed the culture of Goldman Sachs. It is not the Goldman Sachs that represented companies as an investment banker.”

Greg Smith yesterday blamed Goldman Sachs Chief Executive Officer Lloyd Blankfein and President Gary Cohn for a “decline in the firm’s moral fiber” in a New York Times op-ed piece in which Smith announced his resignation from a post in London selling derivatives. Executives at Goldman Sachs are mistreating clients even after the firm paid $550 million to settle a fraud suit with the Securities and Exchange Commission, Smith wrote.

Greenberg said he counted on Goldman Sachs for investment banking when he ran the New York-based insurer. AIG later took billions of dollars of losses on collateralized debt obligations it backed for Goldman Sachs and ran short of cash. The insurer averted bankruptcy only because of a U.S. bailout that swelled to $182.3 billion.

‘Contentious Relationship’

Greenberg’s former firm had a “contentious relationship” with Goldman Sachs, then-Federal Crisis Inquiry Commission Chairman Phil Angelides said in 2010. AIG sought to limit collateral demands in 2007 from Goldman Sachs, saying the bank was too aggressive marking down the value of the mortgage-related securities backed by the insurer through credit-default swaps.

Using rescue funds to cover AIG’s obligations on the contracts amounted to a “back-door bailout” of New York-based Goldman Sachs, Greenberg said.

To contact the reporter on this story: Charles Mead in New York at Cmead11@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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