They say those who live in glass houses should not throw stones. Yet Maurice Greenberg, AIG's former CEO, was quick to blame just about everybody but his own kind for our current economic mess during a recent lecture.
"I don't recall any regulator coming to look at the [insurance] holding companies, and if they did, it was a very superficial job," he said in his talk on "Risk Management in the 21st Century" at the St. John's University School of Risk Management. If regulators "had done their jobs," he added, the economic meltdown might have been avoided or less severe.
His 20-20 hindsight should be taken with a grain of salt, if only because I don't recall Mr. Greenberg using his bully pulpit to push for regulatory intervention while all those toxic credit default swaps were being traded.
And while he rightfully blasted the Clinton administration for encouraging reckless lending, I cannot recall his speaking out at any point to demand more restrictions, especially once the free-market crowd took over in the Bush White House.
Mr. Greenberg--currently chair and CEO of C.V. Starr and Company--said he now backs more regulation and transparency for credit default swaps (which AIG traded in virtual secrecy for years), as well as for the rating agencies that gave their blessing to the securities AIG foolishly guaranteed.
In a letter to National Underwriter appearing in last week's edition, Mr. Greenberg's spokesman pointed out that the enterprise risk management system his boss put in place went awry long after the iconic CEO left AIG.
However, when Mr. Greenberg was still at the helm, his ERM system apparently failed to red-flag the bogus reinsurance transactions conducted with General Reinsurance that artificially bolstered AIG's balance sheet, misleading investors, policyholders and regulators.
You might recall that Mr. Greenberg "retired" from AIG during the fallout from that scandal, which resulted in the criminal convictions of five people. Mr. Greenberg was cited as an unindicted co-conspirator. He also paid $15 million to settle related issues with the SEC. A New York State civil fraud investigation is reportedly ongoing.
But even if he wasn't directly involved, this episode did take place on his watch.
Mr. Greenberg faulted everyone but his fellow financial titans for our economic "debacle," mentioning corporate greed and management incompetence barely in passing at the start of his speech. "We blame management, of course, for the excesses that led to our financial crisis," he said, before moving on to scapegoat the government when he added, "but where were the regulators?"
Hold on! Where were the CEOs? Where were the boards of directors? Where were the enterprise risk management systems?
Mr. Greenberg rightfully blasted the "inherent conflicts of interest" undermining the credibility of rating agencies, but what about the inherent conflicts of presiding over both the board of directors (as chair) and day-to-day operations (as CEO), as Mr. Greenberg did for so many years at AIG?
Mr. Greenberg, despite lugging so much baggage, is still treated with reverence in spite of his recent setbacks. It almost felt like being in a house of worship at St. John's, as the audience sat absolutely still, straining to hear every word as he struggled to speak over a horrific cold.
E.F. Hutton is long gone, but the famous slogan of that once proud stock brokerage firm lives on, at least in spirit, embodied in the certainty that "when Hank Greenberg talks, people listen."
The big question now is why.
Sam Friedman
Editor In Chief
