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The Randian and the Bailout

Bob Benmosche was perfectly happy to while away his retirement on his Croatian vineyard. But the image of AIG employees being beaten up for their bonuses was just too much to bear.


There's nothing subtle about Bob Benmosche. “I’m an in-your-face CEO,” he told me one day, looking down from his vantage point six feet and four inches above the ground. He is a big guy. Big block-shaped head. Big ham-size arms. Infamously big mouth. “People say I use colorful language,” he told a room of people once. “Well, that’s a bunch of bullshit!”

Occasionally Benmosche will lapse into the kind of lingo you expect to hear from someone who has spent 40 years on Wall Street, like when he talks about “cost structure” and “maximizing value,” but those are just the lemons in an otherwise rich and varied cornucopia of anecdotes, parables, fragments of talking points, historical data, conspiracy theories, and opinions that tumble forth whenever you ask him a question.

For example: “Who are you going to vote for this year, Bob?,” which is a question I pose to him in August. We are sitting in the outdoor living room of his villa near Dubrovnik. The moon is high in the sky, cicadas chirp in the lemon trees, and the faint thump-thump of Rihanna wafts over from a yacht docked in the Adriatic. Benmosche is leaning against a wicker sofa in postprandial repose, wineglass perched atop his belly, having just completed a long story that began with a disquisition on the phylloxera blight in nineteenth-century France and ended with an explanation of why Warren Buffett’s claim that his tax rate is lower than his secretary’s is “bullshit.”

He runs a hand over his scruffy white beard. “Somebody who has the best overall approach to things,” he says vaguely, then launches into a rundown of his voting history. “Didn’t like Kennedy. Too much of liberal thinking. Didn’t like people giving away stuff. Didn’t like Nixon but thought he was better than Kennedy. I voted for Clinton both times. I supported Hillary, even though she made me angry. In ’88, I just gave up, I didn’t vote. I mean, Dukakis was a joke, and I was not happy with Bush Senior. I always worried about James Baker and his attitude toward Israel. Turns out I was dead right. On the settlement thing, he said he was worried about ‘excessive force.’ What he was really doing was trying to show Israel who’s boss. I’ve always been amazed that people can be penalized for too strong a reaction. That’s the problem with this George Zimmerman thing down in Florida. When is it ‘excessive’ force? Say there’s a guy and he had a knife. Okay, so I’m supposed to wait for him to cut me once or twice and then I should shoot him? We don’t know who attacked who. People don’t do things like that without good reason.”

There’s a silence. Benmosche knits his eyebrows together. His wife, Denise, refills her wine. “Let’s put it this way,” he says finally. “I think we need a change. I believe that we need a leader that’s pro-individual, that’s pro-business, and recognizes that there’s no free lunch anywhere. There has never been anyone in history that has proven a free lunch works.”

This sounds a bit odd coming from the CEO of AIG, most obviously because his company received the largest free lunch the world has ever seen, after it was revealed that its Financial Products unit had gone off the rails writing ­credit-default swaps—insurance—on mortgage-backed securities. When the market tanked, its parent company was left on the wrong side of billions of dollars of IOUs to major banks and hedge funds, which had been using the swaps to bet against the housing market. The insurer was in hock to so many systematically significant institutions that the federal government felt obliged to step in with a $182 billion rescue package, the largest government bailout in history, to prevent the collapse of the global economic system.

After the U.S. government took a majority ownership in AIG, everyone expected it to stay that way, possibly forever. But in August, the company paid back the money it received from the Federal Reserve. And while we are sitting in Benmosche’s villa in Croatia, the Treasury is making plans to sell off the majority of its stake, reducing it to 16 percent. By next year, the government estimates it will have earned a $20 billion profit on its “investment” and will be entirely rid of its AIG problem. Or, as Benmosche might put it, AIG will be rid of its government problem. The entire reason I’ve been invited to Croatia for four days is to hear about how this free lunch did work.

“But it wasn’t a free lunch,” Benmosche insists. It’s a point of view that I am apparently not the first to fail to appreciate. “Everybody said it’s just not going to happen, they’ll never pay it off,” he goes on. “SIGTARP, Elizabeth Warren, Gretchen Whatshername in the New York Times. The fact is we now have succeeded in getting the Fed back all of their money, and we’re just close to getting the Treasury paid back. And do you know,” he adds, an indignant note creeping into his voice, “neither of them have ever said ‘Thank you’? We have done all the right things. Somebody should say, ‘By golly, those AIG people made a promise and they are living up to a promise!’ We’re left with a major part of the economy in America; they’re going to make a profit on top of everything else they’ve got,” he finishes, settling back into his chair. “God bless America. And God bless AIG. And God bless Tiny Tim.”


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