Go away Hank
The Securities and Exchange Commission’s settlement with Hank Greenberg over allegations that he permitted the use of accounting tricks to manipulate earnings at American International Group comes way too late.
Oh sure, it’s great the SEC managed to squeeze $15 million out of Greenberg before agreeing to settle the more then four-year-old civil investigation. But if the SEC really had the goods on Greenberg, it should have gone after him years ago–settlement or not.
If the SEC had brought an enforcement action against the former AIG chieftain last summer, it might have saved us from watching Greenberg make frequent appearances on CNBC to regularly boast about his skills as a risk manager. For months now, Greenberg has been going on CNBC to claim the giant insurer never would have gotten into so much trouble, if he was still running the show.
In Greenberg’s world, if it wasn’t for former New York Attorney General Eliot Spitzer driving him out of AIG in 2005, the big government bailout of the insurer never would have happened. Why? Well, according to Greenberg, he would have stopped AIG Financial Products from writing those reckless credit default swaps on tens of billions of dollars of now worthless CDOs.
And, as we all know, it was because of all those CDS contracts that the federal government had to come rushing in last September to prop-up AIG and prevent a global financial meltdown.
But here’s the hard truth that Maurice “Hank” Greenberg never liked to talk about during his seemingly endless roadshow to promote himself: he appointed Joe Cassano, the man most responsible for letting AIG Financial Products run the insurer into the ground.
Of course, Greenberg, 84, says if he had remained at the helm of AIG, he never would have permitted the kind of swaps writing that Cassano’s team was doing. And, to be fair, some of the worst CDS deals were done by AIG Financial Products in the latter part of 2005.
Greenberg stepped down as chairman and CEO in March 2005. By the beginning of 2006, AIG had all but stopped writing CDS on subprime-backed CDOs.
But we really don’t know what Greenberg would have done. AIG Financial Products was bringing in so much cash for the insurer, it’s possible he would have looked the other way just like his successor apparently did.
After all, it’s not like AIG Financial Products was a pillar of high ethics.
In 2004, AIG had to pay $126 million in fines and restitution to the SEC and Department of Justice to settle an investigation into allegations that AIG Financial Products helped engineer improper earnings smoothing transactions for two companies.
At the time of the settlement, Cassano already was the head of AIG Financial Products. And what about Greenberg, he was still at the helm of AIG when the deal with the government was announced in November 2004.
Hank, please hang it up.