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The Randian and the Bailout

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Protesters outside AIG offices in March 2009.  

A few nights later, he was talking about it over dinner with his friend, a wine merchant from Bosnia we’ll call Fernando. “It’s sad,” Fernando said. “Here we are in the former Yugoslavia, we’re all trying to be capitalists, and you are becoming socialists.”

Benmosche waved the comment off, but he thought about it all the way home. “My girlfriend was there,” he recalls now. (Benmosche has a girlfriend and a wife; more on that later.) “She said, ‘He’s right, you know. You have to do something. The world is falling to hell in a handbasket, and you are just sitting here.’ ”

Benmosche started to think: Maybe she was right. Maybe Greenberg was right. Maybe he was the only one with the tools to stand up to the insidious socialism threatening America.

There were only about a dozen candidates qualified for a project like AIG, and most of them didn’t want to touch it. By the time Benmosche arrived in Washington, the Treasury Department was looking at a short list of three candidates, and Millstein, along with Sarah Dahlgren (the head of the Federal Reserve’s AIG monitoring team) and the AIG board (recently restocked with so many old hands it resembled The Expendables: Wall Street Edition), all thought Benmosche seemed the most promising.

Washington was skeptical. The phrase “bull in a china shop” was often used in descriptions of Benmosche’s management style, and Treasury was feeling fragile. The furor over bonuses, which was quickly followed by the furor over the release of the names of the AIG counterparties that had been bailed out, had nearly cost Treasury Secretary Tim Geithner his job, and the department couldn’t afford any more terrible public-relations scenarios like the executive retreat that occurred a month after the bailout, which had given Congress its best grandstanding material in years. (“They were getting manicures! Facials! Pedicures! Massages! While American people were footing the bill!”) When Benmosche rolled into Geithner’s office with his take-it-or-leave-it attitude and Mediterranean tan, ­National Economic Council ­director Larry Summers visibly recoiled.

When they expressed their reservations, Millstein pushed back the hardest. “It was important that the Secretary, Larry Summers, and the White House think it’s the right guy, but the truth is they weren’t going to get to know him well enough,” he says. “Whoever this was going to be would be my partner. It needed to be a guy who I could talk to, and who knew insurance, and could help me figure it out. Because I didn’t know shit about insurance.”

Not everyone was convinced, but Liddy was already halfway out the door, so what choice did they have? Treasury gingerly stuck out a hand to greet its newest employee.

Benmosche may have been out of the game for a while, but he didn’t waste any time establishing his authority at his new place of employment. In early August, before he’d officially begun work, he was invited to a meeting headed by Paula Reynolds, AIG’s restructuring chief, who’d been hired by Ed Liddy and had also been up for his job. It was a full house: All of the directors were present, along with representatives from the Fed and the Treasury, a clutch of advisers from Blackstone, and an army of consultants from McKinsey, which had advised the company on the plan that Reynolds was presenting, which they called ­Project Destiny.

It had often been said at AIG that the person who really knew how the company worked was the man who built it, Hank Greenberg, and that he had kept the only map inside his brain. When Financial Products exploded, it blew a hole in what was thought to be a highly regulated life-insurance and property-casualty business and provided a view into the company’s inner workings few had ever seen. As its vaguely omnipotent name suggests, American International Group contained a little of everything: a small bank, an airline-leasing company, and a terrifyingly vast array of international companies that underwrote everything from cows in India to satellites orbiting the Earth. To the emergency team that came in following the crises, the impulse was to get rid of everything, to disassemble this Frankenstein monster once and for all. This was the idea behind Project Destiny. Benmosche had a different one.

“Say you’re sitting there, you have gangrene,” he says to me one morning, before I’ve even had coffee. “And I don’t have any instruments. All I have is an ax. And I’ve gotta grab the ax and cut that sucker off. But the ax is dull. And it makes a mess. That’s what they did, in the beginning. They whacked that sucker off. And they kept hacking. But there was value in the body that was left. The body could produce things. And it owed people. What are you going to do, kill the body? Want it to be so ugly and deformed that it could never live? No! What you do is you clean it up, make it more cosmetic. Maybe we can help them get a prosthesis. Maybe they can run in the Olympics one day, like a double amputee, as we saw. Can you imagine that? A double amputee running in the race.”


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