RadiclDreamer
Diamond Member
http://money.cnn.com/news/news...INE001058_FORTUNE5.htm
By Michael R. Crittenden
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- American International Group Inc.'s (AIG) former chairman blamed the executives who replaced him for the company's collapse, refusing to accept any responsibility despite coming under fire from lawmakers on his role in fostering the firm's financial products division.
"I think they got greedy. I think they wrote considerably more business than they should have," Maurice R. Greenberg told the House Oversight and Government Reform Committee Thursday.
AIG, in a statement released by the company, called Greenberg's claims " implausible."
"The claim that he could have hedged the entire book, or forced counterparties to renegotiate collateral provisions, is not grounded in reality," the company said. "It is also at odds with the fact that under his tenure none of these trades was ever hedged."
Greenberg, who headed AIG for 38 years before departing under pressure in 2005, said the U.S. government's effort to prop up the firm - to the tune of $ 170 billion in government aid - has "failed" and the company should be restructured. AIG would have been better off filing for Chapter 11 bankruptcy protection instead of seeking government help, he said, and the current plan to liquidate the firm and sell off its assets should be abandoned.
Instead, Greenberg continued, AIG's current management should be replaced and the U.S. government should reduce its stake in the firm from 80% to 15%.
"My approach focuses on reconstructing and sustaining AIG so it will in the future be a healthy and vibrant company once again," Greenberg told the committee. "Let me be clear, AIG's business model did not fail. Its management did."
He was even critical of current AIG CEO Edward Liddy, who was put in place at the firm after the government rescue in September. Though he called Liddy a " nice man," he said the longtime Allstate Corp. (ALL) executive does not have the experience managing a global financial services firm.
"He doesn't have the background for the job that needs to be done," Greenberg said.
Lawmakers wanted more from Greenberg, pressing him on his ongoing litigation with AIG and what role he played in fostering AIG's financial products division, the unit that wrote vast amounts of credit-default swap contracts that ended up forcing the government's rescue of the firm.
"Mr. Greenberg's testimony should be taken with a grain of salt," Rep. Darrell Issa, R-Calif., said. "At the very least, we must acknowledge these biases."
Rep. Elijah Cummings, D-Md., was more direct, asking Greenberg: "Do you take any responsibility at all?"
Greenberg, accompanied by high-profile attorney David Boies, refused to accept any blame.
"No I don't," Greenberg said, referring to subsequent losses at the financial products division and downgrades of AIG's ratings. He said the management that took over when he left the firm "must have paid very little attention" to the growing problems that led to the firm's demise.
Rep. Jason Chaffetz, R-Utah, was involved in a heated exchange with Greenberg over the number of AIG shares he still owns and whether he should use the proceeds of any stock sales to help pay back what the company owes the government.
"Would you be willing to give this money back to go back to the taxpayers?" Chaffetz asked.
Greenberg appeared annoyed by the question.
"Why would it go back to the taxpayers?" Greenberg said. "You go out in the street and start collecting from them."
Additionally, Greenberg said billions in government funds should not have been paid to AIG's counterparties; giving other financial firms guarantees would've been a better option.
"These cash payments to (credit-default swap) counterparties should never have occurred," Greenberg said. "It would have been more beneficial for the American taxpayer if the federal government had walled off AIG Financial Products...and provided guarantees to (AIG financial products') counterparties rather than putting up billions of dollars in cash collateral to those counterparties."
The battle of words between Greenberg and his former company did not stop at the end of the hearing. Following the meeting on Capitol Hill both sides released more critical statements.
"He refuses to acknowledge that he approved entry into the credit default swap business, approved more than $40 billion of swaps written on CDO's containing sub-prime loans, and didn't hedge or put up reserves against them," AIG said in a statement.
Lee Wolosky, Greenberg's attorney, responded with his own critical statement forllowing the testimony.
"AIG has launched a taxpayer-funded public relations campaign to try to blame Mr. Greenberg - who retired from AIG in early 2005, when AIG was a very strong company - for massive losses that occurred in 2007 and 2008," Wolosky's statement said.
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com
