CHICAGO, Jan 10 — The former head of American International Group Inc is urging a closer look at the actions of Goldman Sachs Group Inc, claiming the investment bank contributed to the insurer’s near-collapse, the Wall Street Journal reported yesterday.
Maurice “Hank” Greenberg, former chief executive of AIG, told the Journal in an interview he believed not enough attention was being paid to the role Goldman Sachs played in the subprime meltdown.
“Well, it certainly wouldn’t be difficult to come to that conclusion,” Greenberg told the Journal.
Goldman Sachs shot back at Greenberg, who based some of his accusations on articles in the New York Times, the Washington Post and other news outlets.
“Anyone, including Mr. Greenberg, who relies on news reports rather than facts to form an opinion, particularly of a complicated subject, has a very high probability of reaching the wrong conclusion,” Lucas van Praag, a Goldman Sachs spokesman, told Reuters.
AIG had to be propped up with some US$180 billion (RM612 billion) in taxpayer support after it nearly collapsed in September 2008. The US government now owns nearly 80 per cent of the company, once the world’s largest insurer by market value.
The government stepped in to rescue AIG after it ran short of funds to meet collateral demands from global banks that had bought credit protection from an AIG financial products unit. The government saw the AIG’s possible collapse as a systemic risk.
Greenberg, who left the company in 2005 amid fraud allegations, is calling for a fresh look at the role investment banks, and especially Goldman Sachs, played in developing new policies on credit default swaps and housing-backed derivatives that caused AIG’s downfall.
He charged that Goldman Sachs, sensing a downturn in the housing market, created subprime housing-backed derivatives, and at the same time began shorting them, or betting they would fall in value.
Greenberg called on investigative journalists, members of Congress and shareholder lawsuits to explore the policies that led the company he built up over four decades to implode.
“There is too much smoke, too many smart people asking questions that deserve an answer. I would hope that investigative reporters do the job they love to do and bring the truth out. I would hope that Congress would then say we must do something about this in all fairness,” Greenberg told the Journal.
“The American people should know about this and then bring about the changes necessary to avoid the total destruction of a great company that was the pride of America in the insurance industry,” Greenberg was quoted as saying.
According to the journal, Greenberg has devised a plan that would extend the terms of the government’s US$112 billion loan over 20 years, and cut its interest rate. And he wants the government to pare back its 79.9 per cent stake in the company, saying taxpayers would be better served by a company that was not majority-owned by the government.
Greenberg was not immediately available for comment.
AIG spokeswoman Christina Pretto declined to comment.
The US$180 billion federal bailout of AIG continues to rankle lawmakers, who on Friday pressed for Treasury Secretary Timothy Geithner to testify on the New York Federal Reserve Bank’s dealings with AIG after its government bailout.
The House oversight wants Geithner, who headed the reserve bank at the time of the AIG bailout, to answer questions about whether company executives were told to hold back information about how they were spending taxpayer money during the financial crisis. — Reuters
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