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On the Line for Others' Losses
AIG's units cover many types of insurance, but its mortgage-related business has put it on the line to cover massive losses.
(By Mark Lennihan -- Associated Press)
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"Numerous of the Wall Street banks are exposed" to AIG, said Rodney Clark, an analyst for Standard & Poor's, the credit-rating firm. He said Merrill Lynch, which was acquired by Bank of America in a fire sale over the weekend, most reliant on the expected insurance payments.
The government's plan to help AIG will exclude the insurance subsidiaries, which are regulated by state authorities. AIG released a statement saying that its life insurance, general insurance and retirement services businesses were adequately capitalized and could meet their obligations. Most states run pools to backstop insurers who are unable to pay claims, though terms vary.
AIG was a darling of Wall Street before it started running into trouble five years ago. The company achieved startling growth under Greenberg, an insurance scion whose sons also led major insurance concerns.
Although AIG never paid extraordinary salaries, the most successful employees could become partners in CV Starr and Co., a financial services firm named after AIG's founder. Starr partners could easily earn millions of dollars. AIG operates in 130 countries and has more than 100,000 employees.
AIG executives spent a lot of effort earning the affections -- and allegiance -- of government officials in the United States and overseas.
Ron Shelp, a former AIG vice president and one of Greenberg's lieutenants who has written a book about AIG, called it a "culture of influence."
"It was a belief that you can bring most government officials around to your view," he said. For instance, AIG worried about whether countries would try to nationalize its insurance subsidiaries.
AIG lobbyists worked to persuade U.S. lawmakers to impose tariffs or cut off other countries' exports if they acted against the interest of U.S. corporations operating subsidiaries overseas, Shelp said.
Greenberg was known as an irascible leader whose presence could be felt across a room. To build AIG, he launched a buying spree of insurance companies and other financial firms. That effort paid off personally: At one point, Greenberg was worth $3 billion.
In 2005, Greenberg was forced out as chief executive in a clash with regulators who questioned the company's accounting and other practices. AIG ultimately agreed to pay more than $1 billion dollars in fines to the government to resolve the charges.
Martin J. Sullivan, another AIG insider, replaced Greenberg. He was forced to resign earlier this year because of the company's growing mortgage-related losses and was replaced by Robert Willumstad, a former Citigroup executive. The terms of the rescue package allow the government to replace Willumstad, and a source familiar with the matter said last night that Willumstad would be succeded by Edward Liddy, former chief executive of Allstate.
Staff writer Neil Irwin and staff researcher Julie Tate contributed to this report.
