AIG Founder Wielded Personal Influence in Washington
Wednesday, October 1, 2008
In the four decades that Maurice R. "Hank" Greenberg was at the helm of American International Group, he persuaded Washington to back him on many deals that helped his insurance company beat competitors and ultimately grow into the 18th-largest corporation in the world.
Greenberg makes no apologies for personally dialing lawmakers and senior White House officials to try to protect AIG's interests, especially when he sought to break into untapped foreign markets. In a rare interview since the company he built imploded and received an $85 billion government bailout, he said that knowing Washington was a critical part of his job as he expanded AIG to operate with $1 trillion in assets and in 130 countries.
"I think a CEO should be directly involved," said Greenberg, who was ousted as chairman in early 2005 but remains a force by owning and controlling the largest single chunk of the company's stock. "When you're growing a company and trying to get into other markets . . . what do you think a CEO should do? Go to the movies?"
Greenberg was the architect of AIG's muscular Washington lobbying effort, which spent $72 million in the past 10 years and led the corporation to be ranked as one of the top 30 lobbying powers in recent history. Aided by the $7 million that the company and its executives poured into presidential and congressional campaigns and the $25 million that Greenberg's charitable foundation gave to powerful anti-regulation trade groups, AIG's clout in Washington soared.
"AIG was the ultimate insider corporation that had a revolving door with Washington, and could grab the attention of any policymaker with the money they spread around Capitol Hill," said Richard Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees. "It's an incredible amount of money they've used to push back against regulations that were designed to protect the American consumer."
Earlier this month, AIG came close to death after guaranteeing billions of dollars worth of banks' and financiers' mortgage-backed investments that proved toxic. With more mortgages failing and AIG facing mounting claims, it did not have enough cash on hand.
Some question whether AIG's power played a role in the Treasury's decision to bail out the company and let others fail. But many financial analysts argue that the rescue was essential because AIG's failure would have weakened or bankrupted so many other investment houses left holding the worthless mortgage investments, including Goldman Sachs.
If AIG bounces back, a rise in its stock value would restore some money to Greenberg, who lost millions in the firm's fall. And as the 84-year-old positioned himself last week to buy parts of AIG that are put up for sale to pay the mortgage claims, his legendary pull in Washington may prove useful once again in AIG's revival.
"They have long played this game like experts, and it's certain that their pull on the political front plays a role in their access to support now," said Sheila Krumholz, executive director of the Center for Responsive Politics. "AIG's goodwill is legendary."
AIG's clout came in large part from Greenberg's commanding persona. Wall Street called the hands-on chairman a genius, and at least four presidents sought his advice on international affairs and financial markets. For years, he ranked among the 150 richest people in the world. When he sought help from lawmakers and administration officials, they returned his calls -- and generally quickly.
"What I've found is . . . the people you want to see don't want to talk to someone lower down in the hierarchy," Greenberg said. "They don't want to talk to your minions. They want to talk to the boss."
Greenberg backed up his own influence with a board of directors that included members with deep ties to their respective political parties. Among them were President Bill Clinton's defense secretary William S. Cohen and former U.N. ambassador Richard Holbrooke. On the Republican side, there was Carla Hills, who had been U.S. trade representative under President George H.W. Bush, and whose husband had been chairman of the Securities and Exchange Commission.