AIG, the world's largest insurer, just launched a major advertising campaign thanking Americans for their taxpayer-funded bailout of the company in 2008. But AIG's former longtime CEO Hank Greenberg apparently is not very grateful for the way the government handled AIG's rescue.
Greenberg, who served as AIG's CEO between the late 1960s and 2005, attacks the government in his new book The AIG Story, set to be published on Jan. 29. In the book, Greenberg contends that AIG was "ultimately taken over and run aground by a cadre of auditors, lawyers, outside directors, and government officials," according to an excerpt noted by Bloomberg. "The AIG story shows how such custodians run amok."
AIG, which sold a massive amount of insurance on toxic mortgage-backed securities, was on the brink of collapse during the financial crisis as its losses mounted and cash ran short. The government's taxpayer-funded bailout in 2008 saved the company.
The book, which is co-authored by Lawrence A. Cunningham, says that the government used the AIG bailout "to funnel staggering amounts of bailout money to Goldman Sachs and other 'too-big-to-fail' banks." It also says that a statute referenced by the Federal Reserve to take over AIG "did not authorize the Fed to seize control of private property and the constitutionality of any such provision would be doubtful."
Greenberg is so unhappy with his company's taxpayer-funded rescue that he sued the government last year. AIG is now is considering joining his lawsuit, The New York Times reports. The lawsuit contends that the government's terms in the takeover were too costly for shareholders.
Nonetheless, AIG's shareholders might have been left with nothing at all if the government had not stepped in. Bankrupt companies are required to pay off bondholders before shareholders.
The government sold its last stake in AIG in December. During the financial crisis, it was generous with one group in particular: AIG's counterparties, which included Goldman Sachs. The Federal Reserve Bank of New York, led then by current Treasury Secretary Timothy Geithner, chose to pay them 100 cents on the dollar for their derivatives deals.