From: in2dadark on 24 Sep 2009 08:25
Commentaries - Time To Junk AIG
by: Matthew Goldstein
15:27 September 22nd, 2009
The federal governments $180 billion effort to prop up American
International Group has worked, averting an even bigger financial
catastrophe. Now its time for the Obama administration to oversee the
dismantling of the failed insurance giant with all due speed.
A report this week from the Government Accountability Office makes
clear that AIG would crumble and likely reignite financial fears
around the world without the governments massive support.
And the report says its unclear whether AIG will ever pay back the
$121 billion in government assistance thats still coursing through
its balance sheet.
The GAO report should provide the administration will all the
ammunition it needs to get tough with AIG. The reports conclusions
should stiffen the spine of regulators in their dealings with Robert
Benmosche, AIGs new $9 million chief executive.
The former MetLife chief executive seems to act as if he has taken
over a financial company thats simply made one or two bad decisions
not one that nearly brought the global economy to its knees.
Benmosches plan to take his sweet time in selling off AIGs assets
might make sense if the insurer could someday stand on its own without
the governments help.
But the GAO report raises serious doubt about whether AIG will ever be
self-sufficient again, noting that the company continues to rely
heavily on the federal government as its source of liquidity and
Worse, Benmosche is taking counsel from Hank Greenberg, AIGs former
longtime CEO, whose only concern is protecting his still significant
equity stake in the de facto taxpayer-owned insurer.
Now Greenberg is trying to get Representative Edolphus Towns to take
up his cause of restructuring AIGs bailout package to make it easier
for the insurer to live on.
But Towns, the chairman of the House Committee on Oversight and
Government Reform, who once sat on the board of subprime mortgage
lender MortgageIT, should not be taking Greenbergs calls either.
Its odd that the Brooklyn Democrat is taking a tough stance with Bank
of America over its questionable acquisition of Merrill Lynch, but is
fielding ideas from the man who oversaw AIGs transformation into a
The time for kowtowing to Greenberg must end. All this is doing is
giving false hope to those investors whove been snapping up AIGs
shares on the belief the insurer can turn itself around. AIG cant and
With the worst of the financial crisis now past, its time to break up
AIG and move on. AIG rightfully deserves to join Bear Stearns and
Lehman Brothers on the ash heap of history.
A dissolution of AIG would serve as an important reminder to Wall
Street and giant banks around the world, that theres a price to be
paid for becoming too big to fail and then failing.
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