The AIG Story

I just polished off The AIG Story, written by the guy who built AIG -- Maurice Greenberg -- together with business/finance writer Lawrence Cunningham. It's the 5th book I've read on AIG, which is pretty much all of them, so it's a topic I know reasonably well for the cohort of people who never worked there, but all of my knowledge is still very mediated.

Greenberg makes the case that he was basically taken down for no particularly clear reason by Elliot Spitzer when the NY AG was trying to make a name for himself, and he makes the case pretty diligently and persuasively. Once Greenberg was forced out of AIG, there was basically nobody capable of running the place well (and for this lack Greenberg himself probably shoulders a significant share of blame, he didn't build an able enough core of lieutenants to render himself replaceable). Then AIG Financial Products got way out of hand, and history ran its course.

Greenberg also argues pretty well against the actions taken by the Fed with regard to AIG after Lehman went down in September 2008: the Fed took about 80% of the equity in the company while foisting on it a an $85 billion loan at 14%. It was crazy times, and as a spectator back then I remember we just had an attitude of let them do whatever they need to, just make it stop. But Greenberg is probably right on this point too.

More interesting is his critique of changes to AIG's governance leading up to the crisis. He basically says that AIG was subject to generic bromides about governance: more outsiders, separating Chairman function from CEO, etc, and that the net effect was that nobody was in charge or really understood the business after he was forced out. He is particularly critical of Arthur Levitt, the celebrated Chair of the SEC under Clinton. Again, what he says makes a lot of sense, so I'd be very interested in hearing a governance specialist take a whack at his arguments.

There's no doubt that, once Greenberg was shown the door, AIG got in trouble, and we all eventually suffered. The extent to which he can and should be blamed for the organization's weakness is debatable.