The top financial officer of insurance giant AIG defended the federal government’s $180 billion bailout of the company in a return to his alma mater.
Chief financial officer David Herzog, appointed in October 2008 after several years as the company’s comptroller, spoke last Thursday as a distinguished alumni lecturer at the University of Missouri in Columbia. He graduated in 1982 with a bachelor’s degree in accounting.
Herzog’s 30-minute lecture on the roots of the current financial crisis included an insider’s account of American International Group’s September 2008 collapse. Earlier in the day, he visited with students at the Robert J. Trulaske Sr. College of Business.
“The cost of saving the company was less than having systemic risk implode on the world,” he said. “The risk to the U.S. and global financial systems from the contagion of an AIG failure was too great for the system to handle.”
His visit fell on the same day that the Obama administration announced a plan to drastically limit executive compensation at AIG and six other companies that have not paid back last year’s bailouts.
Under the plan, cash salaries for the top 25 highest-paid executives will be limited to $500,000 and, in most cases, perks will be capped at $25,000.
Herzog did not address that new requirement and declined to answer reporters’ questions after his lecture. A phalanx of campus and city police officers as well as company security guards kept close watch over him after the public talk.
Herzog framed his company’s financial collapse squarely in the context of the country’s broader economic woes. In response to a student’s pre-submitted question, he acknowledged that company was too dependent on high-risk credit default swaps and securities tied to the overvalued housing market.
“We were a participant in that chain,” he said.”
Herzog said the company is “grateful” for its taxpayer support and on track to pay back the government and turn a profit.
“This is a great company. If we do our job right, we’ll have a great future.”
The federal Treasury Department owns about 80 percent of the New York-based insurance and financial services conglomerate. The company and Treasury both drew widespread criticism after disclosures of 620 bonus programs totaling $455 million, and 13 retention plans allocating $1 billion, implemented after the government bailout.
Was this article valuable?
Here are more articles you may enjoy.