Maurice "Hank" Greenberg, the former chief executive and brains behind the growth of American International Group, blamed the company's liquidity problems on management's failure to practice sound risk management.
In an interview last night on the "Charlie Rose Show" that aired on Public Broadcast Stations (PBS), Mr. Greenberg 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 by then Attorney General Eliot Spitzer 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."
Without naming names, Mr. Greenberg blamed his successor, Martin Sullivan, for either not understanding or overseeing the development in that book of business. He also blamed the board of that division for not doing its job of overseeing the business.
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."
AIG suffered a liquidity problem and needed to raise capital to continue its day-to-day operations, or face possible bankruptcy. The company has more than $1 trillion in assets but needed time to raise the cash, and pressure was mounting.
In recent days, the state of New York changed its regulations to allow the company to collateralize $20 billion in insurance business to raise capital.
As the company still faced difficulties raising cash, however, the Federal Reserve stepped in with an $85 billion bridge loan. In return, the Fed will receive a 79.9 percent equity stake in AIG. The loan is to be repaid in two years.
During the interview, which took place before the Fed's announcement, Mr. Greenberg–currently chairman and chief executive officer of C.V. Starr & Co.–called AIG a "national treasure that could not be allowed to default," saying the company touches too many businesses and people internationally. If the company failed, he predicted it would take 10 years to unscramble all of its ties.
He 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 CV 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."
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