By now, you've probably seen your fair share of articles on AIG's (NYSE:AIG) speculative run. Although no one is certain how effective AIG's underlying business remains, how much coming asset sales will net the company, or how much damage its remaining asset-backed securities will wreak, the stock continues to plow upward. The chief reasons cited for its recent run-up include:

  • Confidence that former MetLife (NYSE:MET) CEO Robert Benmosche can use his expertise to turn the company around.
  • Short-sellers being squeezed out of their positions as AIG continues its upward trend.
  • A vague comment from Benmosche that the company will be able to pay back the government and that he "hope[s] we will be able to do something for our shareholders as well." At this point I should note that Benmosche has only been the CEO of AIG for mere weeks, and has been on vacation for most of that time. Not that I'm trying to take a cheap shot at him for the vacation (OK, maybe just a little), but it's pretty clear he has little knowledge of the complexities inherent in AIG repaying the government, or the status of its complicated balance sheet. Effectively, all this means his words should carry little to no value.

But here's the really absurd part
However, I don’t want to deconstruct the horrid financials underlying AIG's business -- I'll let resident financials expert Morgan Housel do that. What I am more upset about is another reason being tossed around for AIG's recent upward trend: a possible reconciliation with former CEO Hank Greenberg. 

Most reports on Greenberg will breezily introduce him as having built AIG into the indomitable insurance giant it was earlier in the decade. Yet, as much as Greenberg has worked PR channels to define himself as a steady force within the company during his tenure, a man who worked to keep risk exposure down, I don't buy it.

In a Washington Post series detailing the company's downfall, Greenberg said he kept its financial products division, which was the one writing the destructive credit default swaps, under tight control. In fact, he went so far as to say his research shows the company had only written $7 billion in swaps on subprime CDOs (collateralized debt obligations) during his tenure.

However, reality begs to differ with Hank Greenberg. According to statements from risk-monger Joe Cassano's lawyer, AIG exited the mortgage underwriting business in late 2005, mere months after Greenberg's departure. While Cassano's lawyer might not be the ideal source for reliable information on who's to blame for AIG's collapse, company spokesman Nicholas Ashooh endorsed his statement by saying, "About half [of the swaps on subprime CDOs] had been issued before Greenberg's ouster."

While Greenberg deserves some credit for building AIG over his long tenure, the facts speak for themselves, and his final legacy is one of failure: He enabled the division that sunk the company. As a central figure in its collapse, why is there any reason to cheer his coming back?

Final thoughts
As much as Fools debate the merits of run-ups in Bank of America (NYSE:BAC) and other financial stocks like Wells Fargo (NYSE:WFC) and Goldman Sachs (NYSE:GS), AIG is in a speculative league of its own. For example, while Bank of America took out $45 billion in government funds, it hasn't had to shed core businesses, or take in as much dilutive government funding as AIG. 

Ultimately, AIG has a lot in common with majority government-owned buddy Citigroup (NYSE:C). They're both practically impossible to value and face huge dilutive aspects. Yet, while both stocks have been trading manically in recent weeks, the events causing AIG's price bumps are too bizarre and insignificant to take seriously. Would Citigroup suddenly shoot up in price if its equally blameworthy former CEO, Chuck Prince, came back?

Could the stock still be a screaming buy? Well, I suppose stranger things have happened, but there have been almost zero material changes in the company to justify its recent surge. If investors are so hungry for any shred of good news from AIG that they'll wildly bid up shares on the return of a fallen CEO, then I fear for those jumping into this game of musical chairs. AIG's riding a wave of general optimism and risk-hungry investors looking to earn back losses in a hurry, but I fear for the investor left holding the bag when it becomes clear there’s nothing but hot air in this stock's sails.

Care to disagree? Have at it in the comments box below.

Eric Bleeker owns a position in Citigroup, but regrets that decision. The Motley Fool’s disclosure policy is passing on investing in AIG in favor of putting it all down on Red 7.