Charlie Rose Talks to Maurice 'Hank' GreenbergBy
Your book, The AIG Story, tells of one man’s vision for building a great global corporation and how, in 2005, he was forced out.
That’s correct. By [Eliot] Spitzer, not the board of directors.
We’d done a transaction with one of Warren Buffett’s companies, General Re. … [It] had no effect on shareholder equity or earnings per share. Spitzer got ahold of that because one of Buffett’s companies had done a transaction that bankrupted a medical malpractice company. So he turned over to Spitzer all such transactions that his company had done. Spitzer jumped on that.
This also stems from something you said in a quarterly earnings call.
I was asked, “What is the regulatory environment like today?” So I answered by saying that a foot fault is like a murder charge, meaning that the environment had gotten so different after Enron—new laws, new regulations. The pendulum swung from one side to the other.
And how did Spitzer react?
The [New York State] attorney general said, “I’m going to take Greenberg down.”
And how do you know that?
[Former New York State Attorney General Dennis] Vacco was in Spitzer’s office representing a client. I asked him if he would put that in an affidavit. He said yes, and it’s in the book.
So why did the board force you out?
There was a board meeting while I was out of town. I was asked to call in, which I did. Frank Zarb, who I had put on the board, and Dick Beattie were on when I called and said Spitzer said I had to resign. I could remain as chairman until the annual meeting. I decided against staying. But Spitzer threatened the board. He was going to indict the board.
You created AIG’s financial products division?
Yeah. We had a AAA rating. It gave us diversification. Diversification is good … if it’s managed right. We made about $7 billion in AIGFP from the time we started until I left. They wrote as much in credit-default swaps—not the quality that we wrote—in the seven months that I was gone than we had done in seven years. All the management controls we had in place were dismantled.
People say you knew every corner of that company, that you were the one person who could have rescued it.
I would have. First of all, it wouldn’t have happened. But if something did occur, we’d have found a way to save it.
Do you believe, as former Treasury Secretary Hank Paulson has said, that if AIG had gone down it would have taken the whole system with it?
I don’t believe that at all. But look what happened when they finally gave AIG assistance. This is Paulson calling then-CEO Bob Willumstad. Calls him and says, “They’re going to give you one opportunity. We’ll lend you $85 billion at 14.5 percent interest.” Everyone getting access to the Fed window is down at 1.5 or 2 percent. “And we’re going to take 70.9 percent of the equity. OK?” Then he said, “And incidentally, you’re fired, so sign the agreement.” [Willumstad] said, “No. You just fired me. Why would I sign?” So he sends in Ed Liddy. Ed Liddy is on the Goldman [Sachs] board. He signs the agreement, then resigns from Goldman’s board three days later. Of the $85 billion, $60 billion goes out the back door. And $14 billion of it goes to Goldman.
This is the heart of the lawsuit you’ve filed on behalf of shareholders.
We have a Constitution that says government can’t take property without compensation.
Could AIG have made a better deal?
They could have done many things. There was no price discovery. Every broker-dealer had a different price. So why would AIG be paying them 100¢ on the dollar?
You lost about 90 percent of your net worth, correct?
Yeah, about. Call it that. That’s not the reason I’m doing this.
What’s happened to AIG since?
They sold many of their quality operations. [American International Assurance] in Asia … Alico, and others. It’s now got a good property-casualty business. [CEO Robert] Benmosche is working hard to make it a better company.
So you approve of the job he’s doing?
I didn’t say that.
Disclosure: The Starr Foundation, of which Greenberg is chairman, is a past underwriter of Charlie Rose.