Image: Maurice "Hank" Greenberg
Choi Jae-ku  /  AFP - Getty Images FILE
Hank Greenberg resigned as CEO of AIG in 2005, his reputation wrecked by an accounting scandal in which AIG overstated the value of its assets.
updated 3/20/2009 12:14:59 PM ET 2009-03-20T16:14:59

Of all the people who are angry at AIG right now, there is one in particular whose anger is at least as great as that of anybody in Congress or the administration but whose voice is one that you haven't heard yet in the uproar over AIG bonuses: Maurice "Hank" Greenberg.

Does the name ring a bell? If it doesn't, that's OK: The first time most people in the country heard of AIG was when it blew up, and given that AIG is (or was) one of the world's most complicated and opaque companies, that's understandable. But for close to 40 years, the AIG name was almost inseparable from Greenberg's. It was Greenberg who built it up from an insurance backwater into an enormous international financial conglomerate. He presided over three decades of its ascent, left under pressure three and a half years before its fall — and is now suing AIG, or what's left of it, for mismanaging the empire he left.

On the surface, the stakes involved in Greenberg's lawsuit filed earlier this month — before the current revelations about AIG's massive bonuses — might seem small. The $70 million in taxes that Greenberg paid on shares AIG gave him that are now worthless sounds like barely a footnote amid the storm of the hundreds of billions of AIG's losses.

The question at stake in Greenberg's suit, however, goes to the heart of what went wrong in American business: Is the current catastrophe the fault of people like Greenberg, who built the edifices that so rapidly came tumbling down, or of the folks left to mind the store just long enough to wreck and pillage it?

Hank Greenberg was one of a generation of charismatic tycoons who built the companies that are now at the center of the current scandal. Now 85 years old, he is of the same cohort as longtime Bear Stearns Chairman Alan "Ace" Greenberg and Citigroup titan Sanford Weill. You can think of these men as The Patriarchs. The paths they took to the pinnacle of finance were different — Ace Greenberg spent his whole career at Bear Stearns, rising through the ranks; Hank Greenberg joined AIG as a rising executive and vaulted to the CEO spot in 1968; Weill built Citigroup through a long series of audacious acquisitions — but at the turn of the millennium each of them led companies so marked by their stamp that it was almost impossible to refer to Bear, Citi, or AIG without in the same sentence mentioning Ace Greenberg, Hank Greenberg, or Sandy Weill.

Of the three, it's Hank Greenberg who was the most controversial. Greenberg resigned as CEO of AIG in 2005, his reputation wrecked by an accounting scandal in which AIG overstated the value of its assets. He was then 79, and there is every indication that he would have held on even longer had he not been forced to quit (possibly, according to Greenberg's lawyer, David Boies, because the New York State attorney's office threatened to bring criminal charges against the company if he did not).

The implicit question posed by Greenberg's suit, and one of the great historical questions that looms over the AIG fiasco, is whether things would have turned out differently with Greenberg at the helm. It is not a question with an easy answer.

On the one hand, the accounting irregularities that AIG engaged in on Greenberg's watch are not trivial. It was clearly a company that aggressively pushed the boundaries of what was safe for a giant insurer to do and in some cases went beyond them — AIG paid a $1.6 billion fine to regulators.

Yet on the other hand, tarnished reputation or not, after Greenberg left, and long before the current meltdown, it was Hank Greenberg himself who emerged as one of the fiercest critics of AIG management. "There's no leadership there," Greenberg told BusinessWeek in 2006, a year after he was forced to resign. "The place is run by outside lawyers." You can chalk some of that up to sour grapes, and the argument that AIG's problem was too many lawyers is not really especially convincing. But the blunt appraisal that there was no leadership turned out to be prescient. Having left AIG under a very dark cloud, Greenberg undoubtedly relished the opportunity to turn the tables when he was called to testify before Congress last year about the fall of the company he built.

"When it became increasingly clear that AIG faced an intensifying liquidity crisis, I offered to assist the company in any way I could," Greenberg told lawmakers, "including by raising tens of billions of dollars in private capital. Unfortunately, I was not able to even arrange a meeting with the company to present my proposals." Or, in other words: Hey, I tried to help, and no one would even take my call.

There are certainly enough questions hanging over Greenberg's tenure that no one should be too quick in letting him off the hook. However, it's meaningful that Greenberg left AIG a meaningful amount of time before the collapse. The financial carnival that combined housing insanity with derivatives mania really played for a surprisingly short run: The greatest excesses by far came in no more than three years, from 2005 to 2007. Greenberg wasn't just sent packing before the final explosion. He left before the party really got started.

That's something else that Greenberg shares with Citi's Weill, who left the CEO spot in 2003 after an agonizing and very public search for a successor (he settled on the disastrous Chuck Prince), and Ace Greenberg, who handed off the chairmanship of Bear Stearns in 2001. All three were risk takers with an enormous appetite for putting their companies' capital on the line. Nonetheless, all of them left their houses in something approaching order.

Which leaves some questions that the historians of the financial crash will be pondering for years: Was the fall of American finance a foreseeable consequence of the hubris of empire building? Were Citi, Bear, and AIG companies that were doomed to fail by the mistakes of the men who built them? Or, on the other hand, did their failures come from the managers who were left behind, people left with the keys to the kingdom and free reign to risk other people's money without worrying about what the boss would think?

The subtext of Greenberg's lawsuit comes down to this: It would have been different had he been allowed to stay at the helm. Tarnished as his reputation might be, it's an idea that is at least worth considering. Over the last months, you've heard a lot about the lack of accountability in corporate America-accountability to customers, shareholders, or the public at large. Indeed, all those failures of accountability are written in glowing letters. But it's also worth asking if the retirement of the patriarchs might indeed have left the simplest accountability gap of all: a boss who understood his business and could look further ahead than next year's bonus.

Copyright Washington Post.Newsweek Interactive


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