Hold the Presses: Greenberg Unlikely to Put AIG Out of Business

(MoneyWatch)  Would you cut off your nose to spite your face? Not likely. And that doesn't appear to be the style of octogenarian billionaire Hank Greenberg, the one-time boss of American International Group.

Today's New York Times theorized that Greenberg, who was forced out of AIG in 2005 when the then world's largest insurer was under investigation by New York Attorney General Eliot Spitzer, is making a move to gather up disgruntled AIG employees for his private company, C.V. Starr. The repercussions of that could cut into AIG's revenue, make it more difficult for the insurer to rebound, and hamper its ability to repay taxpayers.

There is some truth in the story, but how much? Clearly AIG and C.V. Starr have a history. The companies feuded for several years, sued one another and raided each other's employees, going so far as to put up recruiting posters in lavatories. But the biggest battle was over who owned nearly 12 percent of AIG's shares, AIG itself or Starr International, another Greenberg-controlled company.

But the feud ended earlier this year when Greenberg won his court case and got his stake in AIG, now valued at more than $4 billion. After Robert Benmosche took over as CEO of AIG, he and Greenberg revealed that they had mutual respect for each other, a far cry from Greenberg's publicly announced contempt for AIG's previous CEO, Ed Liddy.

Here's the lowdown: Greenberg - through his Starr International investment company - owns about 12 percent of AIG, so he has a vested interest in seeing the company survive and do well. His C.V. Starr firm is largely an insurance broker, which means it sells the kind of policies AIG offers to businesses rather than creating insurance products. So the two can, at least theoretically, be friends, or at a minimum, work together.

Would Greenberg pick off AIG employees? Absolutely. But he's been raiding the AIG staff for years and it's highly unlikely that he hasn't already hired those that he wanted.

Which brings up the question that begs answering: Would Greenberg want the people from AIG's Financial Products unit? Not unless he's radically changing his line of business to include credit default swaps. And why would he? It was one of Greenberg's few bad bets in a career that's spanned more than 40 years. Greenberg will probably never admit it, but Spitzer did him a favor by forcing him out of AIG before the cookie crumbled.