By Steve Forbes, Forbes Staff Maurice R. ‘Hank’ Greenberg is chairman and CEO of C.V. Starr & Co, chairman of The Starr Foundation and former chairman and CEO of American International Group. I recently sat down with Hank to talk about his long career building AIG. Below is the second half of our conversation, in which we discuss his current case against the government. A transcript follows. …read more
Source: FULL ARTICLE at Forbes Latest
By Mike Bauman “Hank Greenberg: Hero of Heroes” does what it sets out to do: Making clear that Hank Greenberg in overcoming prejudice, became not only an important figure in baseball, but in American society. …read more
Source: FULL ARTICLE at MLB
By Morgan Housel, The Motley Fool
Filed under: Investing
For many, the history of AIG starts in September, 2008, when it collapsed and was bailed out by the U.S. government.
That’s unfortunate, because the company has a deep history spanning nearly a century. Long before it was bailed out, and long before it bet heavily on risky mortgage derivatives, it was the one of the most successful and admired insurance companies in the world.
I recently interviewed former AIG chairman and CEO Hank Greenberg, who ran the company for almost 50 years before retiring in 2005. I asked him a simple question: What made AIG great during its heyday? Here’s what he had to say (transcript follows):
Morgan Housel: What I liked about the book is that it spent most of the time on the early days and the growth of AIG during its heyday. I think what’s unfortunate is that for a lot of Americans, the history of AIG begins in September 2008.
Hank Greenberg: That’s exactly right.
Morgan Housel: What was AIG‘s key to success during its heyday?
Hank: Many things. First of all, we had a culture that was quite unique, and I think a lot of it was also when we started. Starr died in 1968. I became the head of the company in 67, and the people around us then, most of us at the very senior level were veterans, had been officers of the military, so there was a separate culture that was just unique, almost a military-like culture of discipline.
We attracted the best and the brightest, people who could live with a very high-powered environment. We were totally committed to building a great company, and we did. It was the largest insurance company in history. The largest in history, in 130-odd countries; it didn’t happen by accident. The planning and the execution were great.
Morgan Housel: You talk a lot about the culture of success. What other publicly traded companies today do you admire, that are doing things right?
Hank Greenberg: I think one of the companies now public was a part of AIG called AIA, in Hong Kong. Its market value today is almost that of AIG. It was wholly owned by AIG. I just had lunch with the guy running it, the CEO, yesterday. The company is a replica of what AIG was.
For more on AIG
At the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool’s premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click here now to claim your copy, and you’ll also receive a full year of key updates and expert analysis as news continues to develop.
Maurice R. ‘Hank’ Greenberg is chairman and CEO of C.V. Starr & Co, chairman of The Starr Foundation and former chairman and CEO of American International Group. I recently sat down with Hank to talk about his long career building AIG, which is featured in this video and in the next video we discuss his current case against the government. A transcript of our conversation follows. …read more
Source: FULL ARTICLE at Forbes Latest
By Morgan Housel, The Motley Fool
Filed under: Investing
Deep recessions only occur every few decades. Big economic shifts occur only a few times a century. An analyst or businessman with 20 or 30 years’ experience can still be wet behind the ears as far as history is concerned.
Which is why someone like former AIG CEO Hank Greenberg is so fascinating to talk to. Greenberg has been an insurance executive since the 1950s, and has done business in dozens of countries. It’s not a stretch to say he is one of the most experienced financiers alive. If he hasn’t seen it all, he’s come darn close.
In a recent interview, I asked Greenberg how the global economy has changed since he began half a century ago. Here’s what he had to say (transcript follows):
Morgan Housel: You’ve been in this business for a long time, some 40-50 years. How is the global economy different today from what it was when you were starting and growing AIG, several decades ago?
Hank Greenberg: Much different — it’s a good question. We were first movers in many countries. Trade in services didn’t exist when we were building AIG. We traded with other countries for goods, but services they looked askance at you and said, “WTO doesn’t cover services.”
Banks, insurance companies, credit card companies, had to fight to get into a country and trade. I was on the President’s advisory board for trade negotiations. I had to first convince our own government that we ought to be negotiating trade in services.
We finally did. It took a long time, and even then many countries were very stubborn in opening their markets. You had to fight to get into these markets. That was one of the major differences; the amount of time that we had to spend in opening markets.
Then, as a first mover, you had an advantage. We could bring things, products, in countries that never had those products before — insurance products. It was an exciting adventure. Of course, we were very good at product innovation. The world changes all the time; new opportunities arise. If you’ve got the people and the vision, you do well — and we did.
For more on AIGAt the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool’s premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click here now to claim your copy, and you’ll also receive a full year of key updates and expert analysis as news continues to develop.
By Selena Maranjian, The Motley Fool
Filed under: Investing
Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.
Today, let’s look at the Eminence Capital hedge fund company run by Ricky Sandler, who seeks growing companies in growing industries and out-of-favor companies and industries. He also likes to short stocks when he finds ones he expects will decline.
The company’s reportable stock portfolio totaled $3.4 billion in value as of Dec. 31, 2012.
Interesting developments
So what does Eminence Capital‘s latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are State Street and Rockwell Automation. Other new holdings of interest include Emerson Electric . Emerson Electric, which recently yielded 2.8%, has seen its performance pressured by Europe‘s troubles and a stronger dollar. In its last reported quarter, revenue was up 5% and EPS up 24%, with management noting that, “Recent order trends suggest market conditions have stabilized and may be poised for improvement, particularly in the emerging markets.” Some Wall Street analysts see it as undervalued, but our own analysts question that, expecting slower growth.
Among holdings in which Eminence Capital increased its stake were EMC and NetApp . EMC is a $52 billion storage giant, positioning itself to profit from the rapidly growing cloud-computing and “Big Data” arenas. It also holds an 80% ownership stake in virtualization specialist VMware, though VMware’s dominance in its market may mean slower growth in the future. EMC‘s recent earnings report was solid, featuring strong operating income growth, and many were excited to hear about its plans to launch a joint venture with VMware called Pivotal, combining their cloud and data analytics services. Pivotal is expected to be spun off as a separate company in the future.
With a market cap of $12 billion, NetApp is a smaller rival of EMC and one that has posted strong results recently, with the promise of more as its competition shrinks. Some wonder whether NetApp will end up being acquired by a bigger fish, such as Oracle, another key player in data.
Eminence Capital reduced its stake in lots of companies, including American International Group . AIG has become a hedge fund darling, but it’s not the best-performing insurer. My colleague Matt Koppenheffer worries about AIG‘s tendency to not plan sufficiently for the future, and fellow Fool Morgan Housel recently interviewed the company’s high-profile former CEO, Hank Greenberg.
Finally, Eminence Capital‘s biggest closed positions included Abbott Labs and Ralcorp Holdings, which was acquired by ConAgra. Abbott has just split its pharmaceutical business from its nutrition and devices businesses. The new pharmaceutical entity is AbbVie, starting out with about $18 billion in annual revenue but also a lot of debt. Some worry that AbbVie is too dependent on its $8 billion drug Humira, which faces patent expiration, though growth in emerging markets may make up …read more
Source: FULL ARTICLE at DailyFinance
By Morgan Housel, The Motley Fool
Filed under: Investing
Few people were as enraged at the terms of AIG‘s 2008 bailout as its former chairman and CEO, Hank Greenberg. Greenberg, who left AIG in 2005, is suing the government for $25 billion. “We have a Constitution in the United States, and there’s a provision against unlawful taking by the government,” he says, “You can take anything you want, but you have to pay for it.”
I sat down with Greenberg last week, and we talked at length about the bailout and his current lawsuit. Here’s what he had to say (transcript follows):
Morgan Housel: Hank Paulson talks in his book about how, in hindsight, it’s easy to say, “We should have done this. We did this wrong” … and they admit that they did things wrong, in hindsight, but they had such short time constraints — some of these bailouts they had to put together in literally hours — that when you’re under those constraints, you’re going to make big mistakes that are only visible in hindsight.
What’s your response to that?
Hank Greenberg: Well, I think that’s an easy statement to make. They were looking after some firms and didn’t care about other firms. It’s very simple.
AIG was used. Let’s face it, AIG was used. The government didn’t do badly. They made about $23 billion on AIG.
Morgan Housel: Your lawsuit is for $25 billion, based on the terms of the deal.
Hank Greenberg: Correct.
Morgan Housel: That goes to C.V. Starr? That goes to AIG shareholders?
Hank Greenberg: It goes to shareholders after deducting, obviously, the expense of the lawsuit.
Morgan Housel: Do you think we’ve learned anything over the past five years, or do you think we’re doomed to keep making these mistakes again?
Hank Greenberg: I think the pendulum sometimes runs too far in one direction, has to come back to the middle. That’s the way we’ve always been, unfortunately. Are we going to make the same mistake next time around?
Depends when next time around is. Is it going to be next month? I think we’ve learned. If it’s about 5-10 years from now, I’m not sure we’ve learned.
The article Interview With Former AIG CEO Hank Greenberg: Criticizing the Bailout in Hindsight originally appeared on Fool.com.
Morgan Housel has no position in any stocks mentioned. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: Long Jan 2014 $25 Calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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By Morgan Housel, The Motley Fool
Filed under: Investing
Hank Greenberg stormed the beaches of Normandy, took part in the liberation of the Dachau concentration camp, and returned home to spend five decades building AIG into the world’s largest insurance company. He retired in 2005 as a multi-billionaire.
Three years later, the company collapsed. He says he lost 90% of his net worth.
Few people know as much about the global financial system as Hank Greenberg, and few are as angered about the 2008 Wall Street bailouts (he’s suing the government for $25 billion.)
Last week, I sat down with Greenberg to discuss AIG‘s early days, its rise to power, and its 2008 collapse. Below is the full interview (34 minutes — transcript follows):
Morgan Housel: Hi, I’m Morgan Housel from Fool.com, and with me today is former Chairman and CEO of AIG, Mr. Hank Greenberg. His new book, The AIG Story, chronicles the rise and growth of AIG, including the fall and bailout in 2008.
Mr. Greenberg, thank you for taking the time to talk to us today.
Hank Greenberg: Thank you.
Morgan Housel: Why now? You left AIG in 2005. AIG‘s downfall and bailout were more than four years ago. Why now to write this book?
Hank Greenberg: Well, several things. First of all, I was busy fighting a lot of lawsuits with AIG, and that took a lot of time.
Second, getting all of the facts as to what happened in the bailout and why, and getting all that documented so that, as you see in the book, everything is documented. There is no area that we left uncovered — just our view, not documented what actually happened. It took several years to get that.
Morgan Housel: What I liked about the book is that it spent most of the time on the early days and the growth of AIG during its heyday. I think what’s unfortunate is that for a lot of Americans the history of AIG begins in September 2008.
Hank Greenberg: That’s exactly right.
Morgan Housel: What was AIG‘s key to success during its heyday?
Hank Greenberg: Many things. First of all, we had a culture that was quite unique, and I think a lot of it was also when we started. Starr died in 1968. I became the head of the company in ’67, and the people around us then, most of us at the very senior level were veterans, had been officers of the military, so there was a separate culture that was just unique; almost a military-like culture of discipline.
We attracted the best and the brightest, people who could live with a very high-powered environment. We were totally committed to building a great company, and we did. It was the largest insurance company in history. The largest in history, in 130-odd countries; it didn’t happen by accident. The planning and the execution were great.
Morgan Housel: You talk a lot about the culture of success. What other publicly traded companies today do you admire, that are doing things right?
Hank …read more
Source: FULL ARTICLE at DailyFinance
By Morgan Housel, The Motley Fool
Filed under: Investing
It’s been more than four years since Wall Street collapsed. What’s happened since then?
Banks have raised tens of billions of dollars in capital. They’re less leveraged and have more liquidity than before.
Consumers have far less debt. Total debt-to-GDP has been declining for four years.
New regulations dictate what should happen if a huge bank faces collapse, ostensibly ending bailouts (in theory, anyway).
We’ve made big strides in the right direction. But so much can still go wrong, and so much still is wrong. Is the financial system actually safer than it was five years ago?
I recently asked that question to former AIG CEO Hank Greenberg. Here’s what he had to say (transcript follows):
Morgan Housel: Do you think the global financial system is safer today than it was in 2007?
Hank Greenberg: It’s now so tight you can’t do anything.
Morgan Housel: That’s an interesting point of view. It might be as dangerous, but there’s not much we can do about it?
Hank Greenberg: I think that, if you look at the regulators that we have, and had at the time, how did all this start in housing? It started with the government.
When our governor was the head of HUD, they loosened the reins. The decision by the administration was, “We want more Americans to own their homes.” They dropped the qualifications for getting mortgages, and people who couldn’t afford a home got a home.
Morgan Housel: The mortgages are being purchased by Fannie and Freddie, right?
Hank Greenberg: Yeah.
Morgan Housel: But a tremendous amount, virtually all of the subprime that was being done in 2005-06 was all in the private market, correct?
Hank Greenberg: Yeah.
Morgan Housel: It wasn’t until 2007 that Fannie and Freddie started getting into subprime.
Hank Greenberg: No, I understand that. I understand that, but they fed on it. Once you start down that road, it became a little easier next time, to the next one, the next one, and the next one.
Then you go beyond that. The SEC, where were they when the investment banks were leveraging the capital 40 to 1? Did you hear anybody say anything?
The blame is widespread. I think if you look at some other countries — a city-state like Singapore — a tiny state, but very well run, and the regulators are terrific. They get paid as much as they would if they were in the private sector, or maybe more. They’re intelligent, smart.
We need to change the dynamics here in the regulatory structure.
For more on AIG
At the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool’s premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click here …read more
Source: FULL ARTICLE at DailyFinance
By Morgan Housel, The Motley Fool
Filed under: Investing
Hank Paulson, Ben Bernanke, and Tim Geithner have probably been criticized and critiqued more than any other trio in the history of business for the Wall Street bailouts they designed in 2008 — as they should be.
But criticizing is one thing; saying, “Here’s what I would have done differently, and here’s why it would have been better,” is quite another, and something that happens far less often.
Last week, I sat down with former AIG chairman and CEO Hank Greenberg (who left AIG in 2005, before the company’s downfall and bailout). I asked him what Paulson, Bernanke, and Geithner should have done differently in 2008. Here’s what he had to say (transcript follows):
Morgan Housel: How should Paulson, Bernanke, and Tim Geithner have responded in September 2008?
Hank Greenberg: They had their mind made up. They wanted to use AIG as a back-door bailout. You had Goldman Sachs, you had Morgan Stanley, you had many institutions who were using AIG to get them funds, and they did.
Now, they could have had access to the window, and they ultimately got access to the window, but they would have gotten a lot more access to the window. Their debt would have been much greater. This eliminated a lot of debt that they otherwise would have had to come up with.
Morgan Housel: What did you think about the terms and the validity of the other bailouts that were given to companies like Citigroup, Bank of America, Goldman Sachs?
Hank Greenberg: The Fed guaranteed — Citi and a number of others — guaranteed a lot of their assets at a fraction of the cost. If the Fed, as an example, had guaranteed AIG FB for whatever; 100 or 200 basis points…
Morgan Housel That was the Financial Products division of AIG that was running the derivatives?
Hank Greenberg: Yeah. It all would have been over. AIG would have regained its AAA rating, and there would have been no collateral calls necessary, and a lot of those assets came back. In fact, AIG was buying some of them last year. Buying them out of the Fed, so clearly if they hadn’t lost their nerve and they’d done it the right way, it all would have been over.
For more on AIG
At the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool’s premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click here now to claim your copy, and you’ll also receive a full year of key updates and expert analysis as news continues to develop.
By Morgan Housel, The Motley Fool
Filed under: Investing
In 2008, as the housing market collapsed from its bubble, AIG suddenly faced billions of dollars of “collateral calls” — counterparties demanding it put up money to back derivative insurance products AIG sold that served as bets on junk mortgages. It didn’t have nearly the kind of money on hand that its counterparties demanded. Facing collapse that would set off dominoes throughout the global financial system, the federal government bailed the company out. The rest was history.
More than four years later, it’s interesting to ask: What else could AIG have done in 2008 to avoid the mess taxpayers got stuck with? Was there a possible private-market solution other than bankruptcy to stabilize the insurer and avoid a public bailout?
Last week, I asked that question to former AIG chairman and CEO Hank Greenberg (who left AIG in 2005). Here’s what he had to say (transcript follows):
Morgan Housel: Was there any other option that AIG had in September 2008, in the private market, to stabilize the company?
Hank Greenberg: There were a lot of things they could have done. First of all, I wouldn’t have responded, as I indicated, to the collateral calls, because who knows what you’re responding to? There’s no price discovery. I wouldn’t have done that.
Of course, we wouldn’t have been in that position to begin with. AIG got in that position for failing to do just the common-sense things that we always did. We knew what risk management was. We had the only enterprise risk management system in the insurance industry at that time. We had both credit risk and market risk. We knew exactly how to run a company.
Morgan Housel: These aren’t arguments that I’m defending, but I want to put forth what the people who led that bailout respond, to that criticism.
They say that if AIG had gone bankrupt in September 2008, it would have caused larger systemic problems, and that since there were no private market solutions … because in the weeks previous, AIG did try to do some private market solutions. They tried to sell the P&C business to Warren Buffett, there were some possible deals with J.C. Flowers, none of which fell through, and here we are at the precipice.
This needs to be fixed right now — it’s Tuesday night and the Asian markets are opening in one hour, we’ve got to get this done now — so they put forth this bailout for AIG. The terms were quite onerous, but those terms were, within weeks, restructured down considerably.
Hank Greenberg: No they weren’t.
Morgan Housel: Please do correct me if I’m wrong, but the first interest rate was LIBOR plus 8.5%, and then that was restructured down to LIBOR plus 3, correct?
Hank Greenberg: Oh, now. That really was months and months later. Months and months later.
I went down to see Geithner — I knew Tim Geithner for a long time from my service on the Fed board — and he …read more
Source: FULL ARTICLE at DailyFinance
By Morgan Housel, The Motley Fool
Filed under: Investing
Hank Greenberg, former chairman and CEO of AIG , sued the government last year for $25 billion, related to the 2008 bailout of the company he founded and built.
The common response when hearing that AIG‘s old boss is suing the government that saved his company is something between utter disgust and anger. It feels like the ultimate “thanks for nothing” move.
I sat down with Mr. Greenberg last week and asked him to explain the motive for the lawsuit. Here’s what he had to say (transcript follows):
Morgan Housel: You’ve recently been involved in a $25 billion lawsuit against the government, specifically the New York Federal Reserve.
Hank Greenberg: Not involved. We have commenced a lawsuit against the U.S. government.
Morgan Housel: Some people, when they hear about the lawsuit after the AIG bailout, they respond with a sense of shock. What was the purpose of that lawsuit?
Hank Greenberg: Several things. First of all, we have a Constitution in the United States, and there’s a provision against unlawful taking by the government. You can take anything you want, but you have to pay for it.
If you go back into the book and you see it started with Spitzer, it led to management changes and those management changes led to the company becoming deeper and deeper into the need for liquidity, so they sought liquidity from the New York Fed, from the window. They were turned down.
They tried to get a broker-dealer license, which would give them access to the window. They were turned down.
At the very last moment, Hank Paulson, then Secretary of the Treasury, calls Willumstad, who was then the Chairman of AIG and CEO. He says, “There’s only one deal we’re going to give you.” That was $85 billion at 14.5% interest. At the window, if they were borrowing, it would have been 1.5%.
As an aside, they opened the window to the Arab Bank, which was then 26% owned by Libya when Gaddafi was running it, so Libya could get access to the window, but AIG couldn’t.
So “14.5%, $85 billion, and we’re taking 79.5% of the equity of the company,” and incidentally he tells Willumstad, “You’re fired.” Here’s the Secretary of the Treasury, calling a public company CEO and firing him. Is this America? Does the government fire CEOs? I hadn’t heard that before.
He then says to Willumstad, “Sign that agreement” that I just related to you.
He says, “Just fire me. I’m not signing the agreement,” so Paulson sends in his replacement, a guy called Ed Liddy who’s on the Board of Goldman Sachs. He signs the agreement, still as the director of Goldman Sachs and resigns from Goldman Sachs three days later, retroactively. Very unusual, to say the least.
Of the $85 billion that they lent AIG … AIG had about $800 billion of assets. They had plenty of collateral. They didn’t have to take 79.5% of the equity at the time.
Now you’ve got the $85 billion; …read more
Source: FULL ARTICLE at DailyFinance
By Morgan Housel, The Motley Fool
Filed under: Investing
I sat down with former AIG chairman and CEO Hank Greenberg last week. We talked about everything from AIG‘s early days, its growth, to its downfall and bailout in 2008.
Something I’ve thought about a lot since 2008 is whether an inquisitive investor last decade could have known how much risk financial companies were taking, or if it was something only insiders had the full details on. I posed that question to Mr. Greenberg, which led into a conversation about “too big to fail.” Here’s what he had to say (transcript follows).
Morgan Housel: These risk problems that came up after you left in 2005, were they something that a general public investor, someone just reading the public information, the 10-Ks, could have pieced together, or was the risk taking that was going on inside of AIG something that you needed to be on the inside to recognize?
Hank Greenberg: Probably, although I’m not sure the 10-Ks that they filed were complete. For example, when the auditors made that statement to the Chairman, that the current management was incapable of managing AIG, they went out to the market to raise $30 billion. They don’t disclose what the auditors had said to the Chairman.
Morgan Housel: Let’s say 2006-07, were you personally aware of the risk taking that was going on inside of AIG? I guess what I’m trying to figure out is, if someone owned AIG stock in 2007, could they, even with hindsight, go back and see, “Oh, look at all this risk that was being taken?”
Hank Greenberg: No, I don’t think so. I was a major shareholder of AIG, the largest individual shareholder. I lost about 90% of my net worth. I was in a war with AIG at that time, literally.
Morgan Housel: We hear a lot about the phrase, “too big to fail.” Was AIG “too big to manage?”
Hank Greenberg: No. We managed it for 40 years, for God’s sakes. You need the right management. Of course it wasn’t too big to manage.
After all, the company was doing very well. There was nothing wrong with the company. The year I left — my last year was 2004 — I think we earned $11 billion, growing at double-digit. What can I tell you?
Morgan Housel: What should we do about the problem of too big to fail? Or is too big to fail a problem?
Hank Greenberg: It depends on the management. If you’ve got the right management, why is it too big to fail?
Morgan Housel: With AIG, the amount of risk-taking that was going on in a fairly small portion of AIG …
Or let’s say with JPMorgan. They had, last year, the London Whale transaction. That, some people look at as an issue of, Jamie Dimon is a well-respected manager, but when you have a company that size, with more than 200,000 employees, and you have a few bad apples over here that have the power to make …read more
Source: FULL ARTICLE at DailyFinance
By Morgan Housel, The Motley Fool
Filed under: Investing
I sat down with former AIG chairman and CEO Hank Greenberg this week. We talked about everything from AIG‘s early days, its growth, to its downfall and bailout in 2008.
Below is one of the most interesting clips from the talk. I asked Mr. Greenberg a simple question: When did AIG go off track?
Here’s what he had to say (transcript follows):
Morgan Housel: When did AIG go off track, from being a first-class global organization to where it found itself in 2008?
Hank Greenberg: I don’t think AIG went off track. We had an Attorney General in New York, now a disgraced Attorney General …
Morgan Housel: There’s actually a quote in your book. I’m going to quote it here. It says, “Eliot Spitzer, an elected public prosecutor in New York, sparked the process that would drive AIG to near destruction.”
Hank Greenberg: That’s correct.
Morgan Housel: When people think about AIG‘s downfall, they think of derivatives and leverage and liquidity. They often don’t think about Eliot Spitzer. What was his role?
Hank Greenberg: Very simple. I was on a conference call with analysts, and one of them asked me, “What’s the regulatory environment like today?” This is after Enron and Sarbanes-Oxley.
There was a change in the atmosphere. Boards of directors became less supportive of companies and their management. They were more concerned about their own liability after Enron. When I was asked this question, I said, “A foot fault is like a murder charge today,” which was a way of trying to dramatize the change that had taken place.
If you read the book, you’ll see there’s an affidavit by a man called Vacco, who had been the prior Attorney General of New York, and he happened to be in Spitzer’s office when one of Spitzer’s deputies came in and said, “Did you hear what Greenberg just said on an analyst call?”
He said no. He repeated that I said a foot fault is like a murder charge. Spitzer then said, in front of this prior Attorney General, “I’m going to take Greenberg down.” He used some other language which was just a disgrace for him to be saying that. It’s in the book.
He used that. He was running for governor. He wanted to take down big names, and he went on a campaign to do that.
He focused on a transaction we did with Warren Buffett‘s company, General Re, which was our largest reinsurance partner. It was five years old, it had no effect on shareholders’ equity or earnings per share — nothing to do with that. It was a peanut transaction, and he tried to make that into a murder charge, and was successful. The board just gave up supporting the CEO.
Now, I was going to step down as the CEO in May. This was in March of 2005. I was going to step down as CEO, stay as chairman to make sure the transition to a new leadership team would go …read more
Source: FULL ARTICLE at DailyFinance