Greenberg Calls AIG Bailout A "Failure"
Former AIG CEO Maurice "Hank" Greenberg told a House Oversight and Government Reform Committee Thursday that the government bailout of AIG is a failure.
In a prepared statement, Greenberg said:
"That plan has failed. A successful liquidation is impossible in the present economic climate since buyers for AIG assets at fair prices simply do not exist at this time. Fire-sale prices will bring taxpayers, who now own almost 80 percent of AIG, only pennies on the dollar for their investment in AIG.
"Since the day the treasury announced its plan to liquidate AIG, value has been destroyed because AIG's people and their relationships — AIG's business — are leaving. The evidence is overwhelming and indisputable that the American taxpayer is an investor in a steadily diminishing asset."
Greenberg came to Congress with a 10-point plan to fix and rebuild AIG.
He advocated reducing government ownership in AIG, splitting off the Financial Products division and asking the banks who received billions in payments from AIG, due to the bad bets of the Financial Products division, to return some of the money in exchange for equity in the company.
Greenberg also reiterated his denial for any wrongdoing on his part in the financial fiasco. He blamed the management who succeeded him after his resignation, as the result of fraud charges, from the company on March 14, 2005. He said the Financial Product group went off on a "tangent," and in nine months booked more than double the amount of contracts for financial products, of lower quality, than it had in the past seven years.
"You would have thought that somebody should have called a halt until it regained its AAA rating and would slow down materially or discontinue," he said. The lowering of AIG's credit rating triggered the payouts to financial institutions that brought down the company.
"AIG did not have a solvency problem, it has a liquidity problem," Greenberg added.
AIG's current management issued a statement contesting the 83-year-old Greenberg's claim of innocence.
"Given that Hank Greenberg led AIG into the credit default swap business, has repeatedly refused to testify under oath about a transaction he initiated when he was still AIG's CEO, and is being investigated by the SEC and the Justice Department, we don't understand how he can be viewed as having any credibility on any AIG issue."
Daniel Farber is Editor-in-Chief of CBSNews.com
