Maurice “Hank” Greenberg, former CEO of American International Group Inc. and creator of the AIG unit whose investments triggered the insurance giants’s near collapse, portrayed himself as a victim in testimony before a congressional panel Thursday.
Some lawmakers questioned his claims of innocence.
“Crumbling of AIG began on your watch,” Darrell Issa, the ranking Republican on the House oversight and government reform panel, said in opening remarks. He said Greenberg’s credibility has been compromised by ongoing government probes.
Several congressional committees are investigating the causes of the rise and fall of AIG, which has received nearly $180 billion in government funds to prevent a collapse. Taxpayers now own 80 percent of the company.
Greenberg, AIG’s CEO for more than 35 years, rejected any responsibility for the company’s troubles and allegations that he had a role in ramping up the risky credit default swaps (CDS) business of AIG’s financial products unit.
The fragile-looking, 83-year-old Greenberg said he knew of no losses from CDS — a type of insurance against debt default — that were initiated during his tenure.
“As far as I know, there were no losses …,” he said. “When I left the company, it was healthy.”
Greenberg, still AIG’s largest individual shareholder, also said the $27 trillion CDS market should be regulated, including reserve requirements.
Greenberg was forced out by AIG’s board in 2005 after he refused to cooperate with an internal probe of off-balance-sheet transactions that were being scrutinized by the Securities and Exchange Commission and various state attorneys general. He is now mired in lawsuits with his former employer and various government bodies.
AIG TUNES IN
AIG, in a series of statements issued throughout the hearing, denied Greenberg’s claim that the financial products unit was ramped up only after he left.
“This business ballooned under his watch,” said Mark Herr, an AIG spokesman.
Herr said CDS transactions were being produced at a faster pace during Greenberg’s last months at AIG than at any other period the unit was writing the contracts.
After questioning Greenberg aggressively in the early phases of the hearing, many lawmakers later eased the tone of the session and tried to use AIG’s troubles to illustrate the need for reform.
Representative Carolyn Maloney, a Democrat, pushed for Treasury Secretary Timothy Geithner’s plan for an umbrella systemic regulator with the power to unwind a company like AIG, which falls into a regulatory no-man’s land as a large non-bank financial institution.
“We now know that lax oversight of large financial institutions like AIG can threaten the very fabric of America, and we now know our regulators need stronger tools” to be able to put firms in receivership, she said.
Democratic Representative Elijah Cummings asked Greenberg if he accepted any responsibility for AIG’s near collapse and its loss of a AAA bond rating just days after he left.
“No, I do not,” Greenberg said.
(Reporting by Kim Dixon; Editing by Jeffrey Benkoe and John Wallace)
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