AIG Founder Perfects the Fault Swap

By Dana Milbank
Friday, April 3, 2009

For a guy whose company is synonymous with the collapse of the world economy, Hank Greenberg has a remarkably clear conscience.

The AIG founder and former chairman came before a congressional committee yesterday to declare that he is utterly blameless -- a claim that requires ignoring the fact that his company created the financial instruments that caused the loss of trillions, the ruin of millions and a government bailout in the hundreds of billions.

"The massive losses at AIGFP" -- the AIG unit that developed the catastrophic credit default swaps -- "resulted significantly from a shift in a way the unit did business after I left the company in the spring of 2004," Greenberg argued. Actually, it was the spring of 2005 that the AIG board ousted Greenberg because of a federal fraud investigation that led the company to restate years of earnings -- but facts did not clutter his narrative. "Let me be clear," he said. "AIG's business model did not fail. Its management did."

Members of the House oversight committee were stunned by the self-exoneration.

"When you refer to management, are you including yourself in that category?" asked Elijah Cummings (D-Md.).

"No," Greenberg answered without hesitation.

"You don't see your role in the company as being part of the failure -- is that what you're saying?"

"Yes," Greenberg replied. "When I left the company, it was a healthy company. . . . We had no problems."

Cummings pointed out that just one day after Greenberg left, AIG's debt rating was downgraded -- the event that precipitated the unraveling -- "as a result of the failures that occurred on your watch."

"Do you accept any responsibility at all for the events leading up to that critical moment?"

"No, I don't," Greenberg replied. "Nothing to do with me whatever."

Greenberg may have a curious sense of history, but his timing is excellent. As The Post's Brady Dennis has documented, he left AIG just months before it became obvious that the credit default swaps -- particularly those linked to subprime mortgages, were becoming a major problem. Likewise, he came to town two weeks after the rage over AIG bonuses died down, resulting in a much gentler reception than Edward Liddy, the man brought in to clean up the mess, received last month when he appeared before a different committee.

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