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Greenberg Says New Deal Should Keep AIG Running
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Copyright 2008 Crain CommunicationsAll Rights Reserved Business Insurance
November 17, 2008
NEWS; Pg. 34
578 words
Greenberg says new deal should keep AIG running
Mark A. Hofmann
WASHINGTON-Federal assistance of $150 billion ``should be enough'' to keep American International Group Inc. afloat, the troubled insurer's former chairman and chief executive officer said last week.
Maurice R. Greenberg, now chairman and CEO of C.V. Starr & Co. Inc., also said ``there's a lot of money in the Middle East and Asia'' that would be willing in invest in AIG. But he said such foreign investors will not put money into a ``nationalized'' company. The federal government owns nearly 80% of AIG as a part of the original $85 billion rescue plan it reached with the insurance holding company in September.
Mr. Greenberg's comments came only hours after AIG and the federal government announced a revised plan that brought the federal government's aid to AIG to as much as $150 billion. Under the plan, the government agreed to buy $40 billion in AIG preferred stock and fund a new facility that will allow AIG to terminate billions of dollars of credit default swaps. The deal will also ease the terms of AIG's existing credit facility, in part to allow the insurer more time to conduct an orderly sale of assets to repay the government.
Mr. Greenberg said the new deal will take ``toxic'' credit products off AIG's balance sheet. The enhanced government assistance ``should be enough,'' he said.
Mr. Greenberg spoke live from New York via an interactive video feed to the annual conference of the Captive Insurance Council of the District of Columbia. He had been scheduled to appear at the conference, but said the developments surrounding the new plan kept him in New York.
Mr. Greenberg said the new plan is an improvement on the government's original approach. He said terms attached to the original $85 billion bailout were ``strangling the company.'' He said he hopes that liberalized terms in the latest plan would give AIG three years to sell off assets at a ``decent value.''
``The only way the taxpayer will get paid back'' will not be out of earnings but rather through selling assets, Mr. Greenberg said. ``But you can't sell subsidiaries in this market,'' he said, saying that cash is scarce and most insurers are struggling. He said there was no point in having what he called a ``garage sale'' of AIG assets in the current depressed market.
He said AIG is likely to sell off much of its life insurance business and personal lines business as well as some other units, but that the decision of what to sell rests with federal authorities, not AIG management.
``AIG management is controlled by the Fed,'' Mr. Greenberg said.
He said that the company's problems arose from actions taken after he stepped down in 2005. The credit default swap problems stemmed from the actions of the AIG Financial Services unit.
``When I was running the company, it was a money-making and controlled entity with very strong risk management,'' Mr. Greenberg said.
He criticized the actions of management and boards of directors that followed him.
``What was management doing? To me it's a tragedy. I'm angry. Obviously, I'm angry. How did all this begin and how did it end?
``It began by an aggressive attorney general who was seeking to become governor, and looking to take down some of the biggest names he could find,'' Mr. Greenberg said in referring to former New York Gov. Eliot Spitzer, who resigned earlier this year after he admitted patronizing prostitutes. ``I think a lot needs to be looked at in our own justice system, or injustice system,'' Mr. Greenberg said.
Art Caption: Stock index [11/10-11/14]: BI stock index, BI brokers index, BI insurer/reinsurers index, BI managed care organizations index * Percentage change of BI Stock Index vs. key indicators * Largest gains * Largest lossesArt Credit: Source: Financial Content Inc.Art Credit: Maurice R. Greenberg says the new deal will take ‘toxic’ credit products off AIG’s balance sheet.Art Credit: Reuters
November 21, 2008
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