AIG’s ex-CEO Hank Greenberg, who Eliot Spitzer ran out of town, is as disgusted by the AIG bonuses as everyone else.
On Charlie Rose last night, he also laughed off the idea that retaining the AIG Financial Products team was somehow critical to the future of capitalism.
CHARLIE ROSE: Go ahead, Hank, what do you think? About the bonuses.<br /><br /> HANK GREENBERG: I think we have to go back for a moment. When AIG FP <br />was created, OK, it was really, it really had the almost a joint venture. <br />70 percent of the profits stayed with AIG and 30 percent went to AIG <br />Financial Products. Of the 30 percent, half of that profit went into the <br />capital of the company and was at risk, along with AIG’s capital. OK? And <br />they couldn’t take it out except over five or six years, one-fifth at a <br />time. <br /><br /> So it was at risk. <strong><span style="color: #ff0000;">It was another form, in addition to the regular <br />risk management, it was an incentive to doing business without jeopardizing <br />your own capital that you are putting in there. <br /><br /> Having lost what they did, bringing about the losses, and having lost <br />their own share of profits and capital, why would you then give them a <br />bonus to make up for what they lost? How does that -- where is the <br />equality of that? </span></strong><br /><br /> CHARLIE ROSE: Well, the rationale was this is the way you keep them, <br />I assume. It’s a retention idea. <br /><br /> HANK GREENBERG: Well, I happen to agree with Gretchen on that, that, <br />well, <strong><span style="color: #ff0000;">where are they going to go? And there are lots of other people you <br />can get. I mean, it could have been handled very, very quickly, could have <br />gotten a team in there very quick. </span></strong> But that is the only way -- you know, <br />that is only one part of this story, this -- the focus has been on the -- <br />on this bonus business. <br /><br /> CHARLIE ROSE: Because it is understandable. Even though it’s <br />compared to the moneys that we are talking about, $170 billion, it is only <br />$165 million. <br /><br /> HANK GREENBERG: Well, in a way, there is an attempt to focus on that <br />and take your eye off of the $170 billion. <br /><br /> CHARLIE ROSE: Right. <br /><br /> HANK GREENBERG: Which I think is wrong. AIG was used as a funnel. <br />Money came into AIG and went out the back door to all these counterparties. <br />