Interview: Former AIG CEO Hank Greenberg: What the Government Should've Done in 2008

Hank Paulson, Ben Bernanke, and Tim Geithner have probably been criticized and critiqued more than any other trio in the history of business for the Wall Street bailouts they designed in 2008 -- as they should be.

But criticizing is one thing; saying, "Here's what I would have done differently, and here's why it would have been better," is quite another, and something that happens far less often. 

Last week, I sat down with former AIG (NYSE: AIG  ) chairman and CEO Hank Greenberg (who left AIG in 2005, before the company's downfall and bailout). I asked him what Paulson, Bernanke, and Geithner should have done differently in 2008. Here's what he had to say (transcript follows):

Morgan Housel: How should Paulson, Bernanke, and Tim Geithner have responded in September 2008?

Hank Greenberg: They had their mind made up. They wanted to use AIG as a back-door bailout. You had Goldman Sachs, you had Morgan Stanley, you had many institutions who were using AIG to get them funds, and they did.

Now, they could have had access to the window, and they ultimately got access to the window, but they would have gotten a lot more access to the window. Their debt would have been much greater. This eliminated a lot of debt that they otherwise would have had to come up with.

Morgan Housel: What did you think about the terms and the validity of the other bailouts that were given to companies like Citigroup, Bank of America, Goldman Sachs?

Hank Greenberg: The Fed guaranteed -- Citi and a number of others -- guaranteed a lot of their assets at a fraction of the cost. If the Fed, as an example, had guaranteed AIG FB for whatever; 100 or 200 basis points...

Morgan Housel That was the Financial Products division of AIG that was running the derivatives?

Hank Greenberg: Yeah. It all would have been over. AIG would have regained its AAA rating, and there would have been no collateral calls necessary, and a lot of those assets came back. In fact, AIG was buying some of them last year. Buying them out of the Fed, so clearly if they hadn't lost their nerve and they'd done it the right way, it all would have been over. 

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  • Report this Comment On March 13, 2013, at 5:01 PM, tomd728 wrote:

    What should have taken place is the unceremonious sacking of this man when it was so apparent that the dogs were out and biting.

    AIG under Greenberg's tenure did oh so well with their products and global footprint...but then what happened ?

    Under his aegis they over levered into the CDL nightmare and almost vanished...

    He would be better off shutting up..counting his money..and be very grateful that he is not being sued for gross negligence.

    A once iconic figure now sounding like the buffoon . It's predictable from such an ego but sad.

  • Report this Comment On March 13, 2013, at 5:08 PM, Clarity8757 wrote:

    AIG is so ungrateful after the way the gov't 'bailed them out'. The gov't biggest mistake was to bail out the banks and AIG. They should have taken that $787B and created a public option where all the unemployed could have found jobs and created domestic competition against the monopolies that run our country.

  • Report this Comment On March 16, 2013, at 8:23 PM, boommeister wrote:

    AIG has paid back all the monies that were used to bail them out. The critics don't like the fact that some of it was through a seizure of assets -- assets which the critics always quote the value of at the seizure price but the fact is, the Fed's funds that held them, kept them until they grew back and were MUCH more profitable. In the end, I think that the assets seized and the cash AIG paid back, totaled over $23 billion in profit over what taxpayers loaned if my memory recalls the figure in total -- it was in the twenties somewhere. GM, Bank of America are the other two who have paid back taxpayers. Love 'em or hate 'em, they do not owe American taxpayers a dime today. Now the others? That's another story altogether.

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