AIG, a symbol of financial crisis, repays bailout loan and finds new foothold

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Washington Post Staff Writer
Sunday, February 6, 2011

Early on Friday afternoon, Jan. 14, more than a dozen employees from the Federal Reserve Bank of New York headed out for a celebratory lunch in lower Manhattan. They chose the Ketch, a restaurant on the first floor of American International Group's iconic headquarters building, at 70 Pine St.

Although AIG had recently sold the art deco skyscraper and relocated nearby, it seemed a fitting place to mark the occasion. Hours earlier, AIG had repaid the final chunk of the New York Fed's $85 billion emergency loan used to rescue the company in September 2008. After two tumultuous years, the Fed was off the hook, the Treasury Department appeared poised to turn a hefty profit on its AIG stake, and the company that had become a symbol for the recklessness and excess behind the financial crisis was looking more like a blessedly boring insurance firm again.

In Washington that afternoon, Robert H. Benmosche - AIG's rambunctious, strong-willed chief executive, who had come out of retirement to try to revive the troubled insurance giant - was taking a victory lap of his own.

He had been ushered into the Oval Office for a brief, unpublicized meeting with President Obama, who thanked him for stepping into a mess and helping turn the tide. Afterward, Benmosche shared a private lunch with Treasury Secretary Timothy F. Geithner.

Then, the 66-year-old executive, a towering man with a shock of gray hair, headed to a downtown office suite for a round of television interviews about AIG's reversal. His boyish face displayed a mixture of weariness and contentment as he settled into a chair overlooking New York Avenue. A former MetLife chief executive, Benmosche had arrived in 2009 at a company mired in controversy and saddled with uncertainty.

A year and a half later, AIG no longer was anathema on Wall Street or in Washington, though the firm's future as an independent company was still no way assured. Critics continued to find fault with the rescue, some arguing that the terms were too generous to AIG, others that they were too onerous.

As Benmosche went before the cameras, Jim Millstein watched intently from his cramped office on the second floor the Treasury Department building. Millstein, a 55-year-old former banker at the investment group Lazard, had been a central engineer of the plan to place AIG on more solid footing and put taxpayers in position to reap a profit from a bailout that had once reached a commitment of more than $182 billion.

Silver-haired and salty-tongued, he had built a long resume of corporate restructurings, but the complexity and public scrutiny of those assignments paled in comparison to AIG.

Now Millstein stood with his hands on his hips, watching the positive headlines about AIG roll across a small television in the corner as Benmosche spoke.

"I can't believe we got all this done in this short a time," he said.

Detractors of the federal rescue have disparaged both the government's handling of the bailout and the Wall Street banks that directly benefited from it, and taxpayers have yet to recoup a sizable portion of their huge investment in the once-mighty insurance giant.


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