Maurice "Hank" Greenberg slammed the federal government for taking nearly 80 percent ownership of AIG as part of its financing deal to bail out the firm he led for many years, saying the result was an unnecessary nationalization of the company.

In a follow-up interview on Sept. 17 on the Public Broadcasting System's "Charlie Rose Show"--the day after the Federal Reserve provided American International Group with an $85 billion bridge loan in return for a 79.9 percent stake in the company--Mr. Greenberg said the loan itself was not a problem, but the equity takeover was not acceptable.

"[I'm] not very happy," Mr. Greenberg, AIG's former chairman and chief executive, told Mr. Rose. "AIG didn't need a bailout. A bailout infers you are insolvent, or you need a capital injection. AIG needed a line of credit--a temporary infusion of cash. It did not need capital."

Mr. Greenberg--currently chairman and CEO of C.V. Starr & Company, once closely affiliated with AIG--added that "what the government did was make $85 billion available, to take down as needed, at roughly 11 percent interest, which is okay."

However, he added, the fact that the Fed took 79.9 percent of AIG's equity as part of the deal "essentially nationalizes the company."

AIG has two years to pay the loan back, Mr. Greenberg noted, and his understanding from press reports is that the repayment will be made through sale of its assets. He said he hopes the core insurance company would not be sold, but it appears the giant firm will be disassembled. "It will no longer be the company I built," he said.

There were still a lot of questions to be answered, said Mr. Greenberg, especially whether shareholders will have a voice in any decisions made about the company. As a major shareholder, he said he has not been briefed on plans for the company's future, but expected the details to come out soon in a securities filing, which AIG will have to release as a publicly traded entity.

He said he still believes that he could have raised the money necessary to keep the company afloat, and AIG did not need to turn to the government for help.

He repeated his claim on an appearance on the same show a day earlier that if he were still at the helm of AIG, it would not be in the position it is today because he would have seen problems coming.

"It has been very painful for me [to see this]," Mr. Greenberg said. "I spent a good part of my life building this company."

He said he was "bewildered" by the situation and was at a loss over how the entire situation got out of control as it did.

When asked about his having to leave AIG in 2005 under a cloud of controversy over the company's accounting that subsequently led to an earnings restatement, he said he would never have restated earnings. "I do not believe there was anything improper," he said. "What was acceptable in one set of years was not okay in another."

"I didn't do anything improper," Mr. Greenberg reiterated, adding that others in senior management who were forced to leave over the accounting issue did nothing wrong, either.

On Sept. 16, Mr. Greenberg, appearing on CNBC's "Squawk Box" program as bankers, state regulators and federal officials met at the New York Fed offices to raise emergency funds to stabilize AIG, said it was "in the national interest that AIG survive." He added that a Fed loan would not necessarily be a "bailout," but rather a way to help AIG deal with "a cash problem."

CNBC analysts that day said the situation was dire, and that if no loan deal could be completed by Sept. 16, it was likely AIG would be forced into bankruptcy.

In his appearance on CNBC, Mr. Greenberg called AIG "a national treasure. Letting AIG go down would be a tragic mistake." Practically speaking, he said resolving the company's trades with counterparties if the firm had to file for bankruptcy "would take years," adding that forcing AIG into bankruptcy would in effect have meant "creating a systemic problem."

"There is no business like AIG," he said. "It affects everything we can do in the world. It would be a loss to America."

In his first appearance with Charlie Rose on Sept. 16, Mr. Greenberg blamed the company's liquidity problems on management's failure to practice sound risk management. He said that at the time he left the New York-based insurer, its financial products division had a small book of collateralized debt obligations business and strong risk management controls in place.

He said the growth in that business took place after he was forced out of AIG in 2005 over an accounting fraud investigation.

"Obviously, a lot of that [risk management] either disappeared, was set aside, or no one paid attention and they just started doing things while no one was watching," Mr. Greenberg told Mr. Rose. "There was a breakdown in the controls that had been established. AIG didn't get to where it was without good risk management controls."

However, Mr. Greenberg said he was at a loss to understand why it happened. "I'm not there, so I can't answer what happened," he said, adding later: "If I were there, this would not have happened."

During the Sept. 16 interview with Mr. Rose--which was taped before the Fed's loan announcement but aired after the deal was announced--Mr. Greenberg said he became aware of the company's problems more than a month ago and, as a major stockholder, offered to help in any capacity possible but was ignored by management.

He added that he was not looking to regain control of AIG or receive any other compensation. Mr. Greenberg said he controls about 12 percent of AIG stock and C.V. Starr controls an additional 25 percent.

Mr. Greenberg said he wanted to help the company by raising capital, looking to sovereign wealth funds for a cash infusion, but that it would be done with a new management in place.

"We wanted to help," Mr. Greenberg said, referring to himself and C.V. Starr. "We don't want anything."

Meanwhile, as bankers and the Fed considered whether to extend a financial lifeline to the struggling AIG last week, Mr. Greenberg filed a notice with the Securities and Exchange Commission, noting that C.V. Starr is considering acquiring all or part of the firm he once led.

In the SEC filing, C.V. Starr said it had hired Perella Weinberg Partners, a small investment bank based in New York, as a financial adviser. The filing said C.V. Starr is apparently considering whether to buy all or part of AIG.

Specifically, the filing said that C.V. Starr is considering acquiring assets from AIG (including one or more of its subsidiaries), providing loans or investments, and perhaps seeking representation on AIG's board, or even seeking to gain control of the company.

The filing goes on to say that its other options could include participating in a transaction that would take AIG private.

The filing added that C.V. Starr could also seek a role in advising the company on its business options--for example, how to improve its financial condition.

A representative for the New York Insurance Department cautioned, however, that the filing also stated that Mr. Greenberg would not be able to participate in AIG's activities in any way until he received permission from the department, and that the department had at that time not even received a request for Mr. Greenberg to participate in AIG's affairs.

According to a report in The New York Times, Mr. Greenberg owns about 39 million AIG shares directly, as well as an additional 243 million shares through his private equity firm, Starr International. The shares were worth about $15.8 billion at the beginning of this year, but just $1.3 billion as of the market's close on Sept. 15.

Special Reports /

Greenberg Slams AIG's 'Nationalization'

Related Stories

Recommended For You