Greenberg Would Have Solved AIG, Problems Some Say

That is the sentiment a number of people expressed when asked to analyze the reasons behind American International Group Inc.’s near-unraveling a year ago. If former Chairman and Chief Executive Officer Maurice R. Greenberg had remained at the insurer, he would have caught AIG’s problems long before it was forced to seek federal help to survive and would have ameliorated, if not avoided, the crisis, some say.

Others, however, say it was AIG’s involvement in credit default swaps—which also led to the collapse of Lehman Bros. and others—that led to AIG’s downfall.

“It wouldn’t have happened if Hank Greenberg had been running the company,” said John Wicher, principal of John Wicher & Associates Inc. in San Francisco. AIG “was probably the last one-man company,” he said. “It was built and led by the sheer force and ability of Hank Greenberg; and when Hank Greenberg left and (Martin J.) Sullivan came in, I don’t think he was able to understand and get his arms around the balance sheet because of its complexity.”

“While the problems may have unfolded like they have,” the company also was hurt by the “real void of CEO continuity,” said John L. Ward, CEO of Cincinnati-based Cincinnatus Partners L.L.C.

Cathy Seifert, an equity analyst with New York-based Standard & Poor’s Corp., said Mr. Greenberg “probably would have had the sense to dial it down sooner” so “the magnitude of the problem may not have been all-encompassing.”

What occurred at AIG, she added, though, was, “in some respects, a microcosm for what happened in the broad economy and the broader sector, so you had a combination of overzealous activity, the lack of an adequate regulatory framework and a lot of turmoil on the top.”

Eric Andersen, New York-based CEO of Aon Risk Services U.S., had another point of view. “I have a hard time believing that one person...would have been able to stop that meltdown of the mortgage market,” he said. “I think they were taking risks that they didn’t understand.”

“It was largely a liquidity situation,” primarily at AIG Financial Products Corp. involving collateral requirements for the contracts it had written, combined with the capital needs of the life insurance operations, that ultimately required a federal bailout, said Mark Rouck, Chicago-based senior director at Fitch Ratings.

Other observers said Lehman Bros. and many others were caught up in the same problems as AIG.

“It’s difficult to assign blame when everybody’s dumb at the same time,” said Steven K. Bolland, president of New York-based intermediary Gill & Roeser Inc.