Former AIG CEO sues U.S. for 'nationalizing' company
February 22, 2013 | By Lorna Aldrich | firstname.lastname@example.org
Maurice R. Greenberg, chief executive officer of American International Group (AIG) from 1967 to 2005, told a Feb. 21 National Press Club Newsmaker audience that the company had been nationalized three times -- by Iran, Pakistan and the United States -- but only compensated by Iran and Pakistan.
"That's the reason we're suing," Greenberg said, referring to the terms of the AIG bailout during the 2008 financial crisis and his suit of the U.S. government for damages. He now leads C.V. Starr & Co., the largest shareholder of AIG stock.
According to Greenberg, former Treasury Secretary Henry Paulson called the AIG CEO and offered him only one opportunity -- an $85 billion loan at 14.5 percent interest, in exchange for 79.9 percent of the equity. Paulson then told the CEO he was fired, Greenberg said.
Greenberg accused the Federal Reserve of treating AIG more harshly than other insurance companies -- for example, by not letting AIG purchase a small bank and thereby gain access to Federal Reserve credit as a bank holding company. Without that access AIG experienced the cash crisis that led to Paulson's demand, Greenberg said.
Greenberg was not CEO at the time, having been asked by the company's board to step down in 2005, following accusations of fraud by former New York Attorney General Eliot Spitzer. Five of seven charges were latter dismissed, Greenberg said.
Greenberg said that after his departure the company abandoned the risk management controls it had used previously, contributing to its later difficulties.
The former AIG leader spoke because he has just finished a book, The AIG Story, co-authored with Lawrence A. Cunningham, on the rise and fall of AIG. "It's a good read. I invite you to read it," he said.
He built the company from $300 million to $180 billion, the world's largest insurance company, by writing policies on large risks and entering international markets first, he said.
He called the company a national asset because its worldwide business created access to world leaders.
AIG was the first to enter China in 1975 and has the first 100 percent foreign-owned life insurance company there, he said. He and former Secretary of State Henry Kissinger traveled to China many times together, he said.
Greenberg mentioned that when the CIA funded a machine to raise a sunken Soviet submarine, AIG insured the machine.
At another time, the U.S. government asked Greenberg, who knew former Philippine President Ferdinand Marcos well through AIG business in the country, to urge him to resign, Greenber said. Marcos did not resign then, he added.
The former AIG leader said the U.S.-China relationship is the most important in the world. With both countries under new leadership he advocated a meeting that would lead to discussions of a free-trade agreement. Such agreements often take eight to 10 years, but in the process many issues are resolved, he said.
"Is a trade war better than a trade agreement?" he asked.