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The Randian and the Bailout

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Benmosche at his villa outside Dubrovnik.  

Gratitude of this kind is unlikely to be forthcoming. The bailout of AIG was one of the most despised events in recent American history. That most of the taxpayer money seemed to go straight to the institutions that caused the problem was hard enough to swallow. When it was revealed in spring 2009 that AIG had set aside $165 million to pay the people in the very unit that had incurred the debts, it tipped the country into a kind of hysteria. Citizens wrote letters to Financial Products employees threatening to strangle them with piano wire. Senator Chuck Grassley of Iowa flamboyantly suggested executives “resign or go commit suicide.” And Edward Liddy, the former head of Allstate whom the Bush administration had hired to run the company as a public service for only a dollar a year, was dragged down to Washington.

“Liddy just got reamed by Congress,” says Jim Millstein, the restructuring officer whom the incoming Treasury Department had hired to work with AIG. Millstein was sitting in the gallery that day, watching the Financial Services Committee shriek like Puritans at the Salem witch trials, wincing as Liddy attempted feebly to explain that the people winding down Financial Products needed to be paid. “By the way, if I’d been in his position, I’d have done the same thing,” Millstein goes on. “When the average American makes $37,000 a year, $165 million spread over 400 people sounds like a shitload of money. But when you’ve got guys who are sitting on the atomic bomb, and it’s really complicated, and these guys wrote the trades that you are trying to defuse, you need a couple to hang around. Sure, you could beat them up and threaten to keep them in their seats, but they weren’t going to be as motivated as if you were treating them like human beings and paying them at least something that was going to be in the ballpark of what their market value was.”

Case in point was Ed Liddy himself, who resigned on Millstein’s first day at AIG headquarters. “Liddy was like, ‘I’m so glad you’re here,’ ” Millstein recalls. “ ‘By the way, you get 30 days to replace me. It was outrageous the way I was treated by the Congress. I’m a volunteer, I don’t have to take this, and I’m resigning.’ ” (Liddy does not recall using this phrasing.)

Millstein looked at him. “I just found your office,” he said. “You need to give me a little more time. Only a lunatic would step into this.”

All hell may have been breaking loose in Manhattan, but crises on Wall Street were no longer Bob Benmosche’s problem. He’d left all that behind when he retired from his position as CEO and chairman of MetLife in 2006 and was spending most of his time tending his vineyards on the rocky Dalmatian coast and arguing with Soviet-era bureaucrats over zoning. His interactions with his old world were limited to meetings he attended as a board member of Credit ­Suisse and Axa and conversations with old friends who came to Dubrovnik, like Maurice “Hank” Greenberg, the longtime CEO of AIG, who was quasi-retired himself after being run out of the company he’d built amid an accounting scandal in 2005.

“Don’t you miss it?” Greenberg asked on one such visit, sitting at one of Dubrovnik’s finest restaurants.

“What?” Benmosche asked.

“The power,” Greenberg said.

“Nah,” said Benmosche. He said the same thing in January 2009, when Greenberg called him to lunch in his office in New York, which contains a simulacrum of the famous Chinese dining room in AIG’s historic landmarked building downtown. The original was gone now, along with the building. Liddy had sold it at a fire-sale price. This was one of the reasons Greenberg had summoned Benmosche.

“They’re killing AIG,” Greenberg told him, visibly pained. “And they’re killing this country. You should be the CEO,” he said. “You are the only person that could do that job.”

“Hank,” he replied. “You have nothing to do with this company anymore. I am sorry to tell you that.”

“I know,” Greenberg said. “But I think Geithner will listen to me.”

“I felt so badly for him,” Benmosche says now of Greenberg. “Here is a guy who had spent his entire life building this company. He had lost over $2 billion of his own wealth. He still believed in the company.” He told Greenberg he’d think about it, then forgot until months later, when he turned on the television and saw Liddy being raked over the coals. “What do you have to say for yourself?” a congressman was screaming.

He couldn’t believe what he was seeing. Not just how Congress was treating ­Liddy—but that Liddy wasn’t really fighting back. “Tell them they earned it, Ed,” he found himself shouting at the screen, as Liddy deflated like a marshmallow out of the microwave. “Tell them they earned it,” he repeats now, shaking his fist. “A bonus isn’t a bonus in our business,” he says. “It’s your pay.” The people in Financial Products had lost all of their stock, he knew, and were working for reduced salaries. “If you stay for a year, help us through this crisis, we can’t pay you $5 million. But we’ll guarantee you at least three. That’s what happened,” he says, his voice rising. He’s getting incensed all over again just thinking about it. “And then the Congress of the United States says you are piggish and you shouldn’t get anything. You’re a pig. How dare you? You say look, I have a mortgage, I’m staying here, I’m fighting with the Street every day to get value for you, and you’re telling me I’m a pig?”


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