The board was stunned. Millstein panicked. “Just imagine if a month after he gets hired, he walks out the door, spitting vituperative about the government, about the company. He could have thrown AIG into a tailspin from which it did not recover.” After the meeting, Millstein and Herb Allison, then head of the TARP program, took Benmosche aside and assured him they would get Treasury to compromise on pay. Feinberg was surprised by the argument they put forth—that it was okay for the taxpayer to invest in AIG stock, but they could not pay AIG employees with it because AIG employees thought it was worthless—but agreed to revise the plan. They left Washington with a new plan, which included a multimillion-dollar stock-and-salary package for Benmosche, which also allowed him to keep his stock in MetLife and limited personal use of the corporate aircraft. “They went back, and I don’t know what they did, but they fixed it,” Benmosche says happily. Not for the first time, he’d show the government who was in charge. Or, as he put it, “I had the gun.”
Benmosche had gotten employees and the government to believe in him. Now he just had to get people to believe in AIG. Which wasn’t necessarily as impossible as it seemed. Benmosche gives Ed Liddy very little credit, but actions taken during his predecessor helped set the stage for his success. Ironically, the mortgage-backed securities that Financial Products had insured hadn’t been all bad, it was just that in the postapocalyptic market of 2008, they were about as likely to get a fair price for them as they were for a McMansion. Recognizing this, the Federal Reserve, working with Liddy and his advisers, had agreed to purchase billions of dollars in mortgage-backed securities, which it placed in special-purpose vehicles that functioned kind of like pawnshops—for a small fee, AIG could keep them off its books until they were ready to be sold. They created similar vehicles for AIA and Alico, the company’s highly profitable Asian and American life-insurance companies, in which the Fed had purchased preferred stock. By the time Benmosche and his team went to work, the market was improving, and the bonds and securities in the first set of vehicles were rising in value, enough that it seemed that the proceeds from those assets, combined with the interest, could feasibly be used to pay off the Federal Reserve’s loan.
To pare down the Treasury’s $70 billion investment, Millstein and his team came up with a sophisticated switcheroo that, most significantly, converted all of the Treasury’s stake to common stock in AIG, which could then be sold off on in chunks on the market.
Keeping AIG’s remaining “body parts” together had been the linchpin of Benmosche’s CEO platform, and anyone who suggested otherwise would get a mouthful about how the whole was greater than the parts. But after sorting through the morass of paperwork surrounding AIG’s international holdings, he came to understand that sales of some properties were inevitable and necessary. “There was no question the company needed to be smaller,” Benmosche says now. “The challenge was not to let on that it needed to be smaller. It would have been a disaster if I had said that.”
AIG at that point was too fragile to withstand any more doubt. “My sister’s ex-husband was a lab technician,” he says. “One day he was taking blood at the blood bank when he saw one of the older patients was starting to go into shock. He ran over, turned off the blood, and says, really calmly, ‘Why don’t we slow this down a little bit,’ you know. ‘Just relax.’ And the guy says, ‘Oh, okay, thank you.’ While he’s doing this the resident walks in and says, ‘What are you doing?’ He says, ‘I think he’s in shock, I wanted to calm him down.’ And the resident goes over and tells the patient he’s going into shock. Well, the patient almost died. Hearing that sent him over the edge. So you gotta be careful what you say and who you say it to. You can’t sell when everybody thinks you have to sell. But you really have to sell! You just don’t let ’em know that.”
The bluff appeared to be working. In December, Benmosche was approached by the CEO of Prudential UK about purchasing AIA for what looked like a fair price, and MetLife, which had been sniffing around Alico for the better part of two years, seemed prepared to make an offer. “You saw lots of things were happening,” says Russo. “It was a little bit like being on a team that was finally starting to win games.”