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.”
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?”
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.”
As Reynolds walked through the particulars of how they planned to spin off some companies, Benmosche grew increasingly agitated. “I don’t know what she’s talking about,” he finally blurted out, pointing at Reynolds. “We’re not doing any of this. You just go back and you stop the IPO process and you stop the sale process. You let me figure out what’s going on.” The room went silent.
“It was one of the most awkward moments in business I have ever witnessed,” says a person present at the meeting. “He basically executed her in front of everybody.” Reynolds resigned later that day.
Next, Benmosche went to rally the troops at Financial Products in Wilton, Connecticut, who were still salty about Liddy’s appearance in front of Congress and the law subsequently passed by the House taxing 90 percent of AIG pay (it never made it any further). “I want you to understand that what happened will not happen again,” he told them. Then he flew to Houston, where he spoke at a town-hall meeting with 3,000 employees. After that, he headed back to Croatia. “It was the first Zinfandel harvest,” he explains.
He’d informed Treasury when he’d taken the job that he needed to be in Croatia for two weeks in August, for the celebration accompanying the inaugural reaping of his vines. But they were not prepared for the image of Benmosche that flashed on their screens two weeks after he’d been hired to run one of the most troubled companies in the Troubled Asset Relief Program, showing off his villa while a British-accented voice-over noted its “palatial” proportions and queried, in serious-sounding tones, whether the CEO should be so overtly relaxed.
“I mean, I had just hired this guy,” Millstein says now, choking back the slightly hysterical laugh that tends to bubble out of him when he talks about Benmosche. “And there he is, in his shorts and his polo shirt. It was just …” he trails off. “You couldn’t make it up.”
Villa Splenid, as Benmosche calls his property, was built for the treasurer of the king of Yugoslavia, and it is indeed palatial, a five-tiered palazzo filled with tapestries and new-looking Louis XIV furniture, perched above the bay. When the sun hits its limestone walls, the whole place glows like a monument to the architectural achievements of the one percent.
For the lord of such a manor, Benmosche is disarmingly quick to welcome people into his home, which is how a throwaway comment landed me here, along with Christina Pretto, AIG’s head of corporate communications; Benmosche’s wife, Denise; and assorted drop-ins, including Fernando the wine merchant, who one afternoon materializes in front of me dripping wet from the hot tub.
He’s driven down from Bosnia with a chef from Sicily and the maximum amount of wine that trade restrictions allow, which is still more than it used to be. “Good thing is this!” he says, tottering off to find a towel. “It is not what you are doing in the United States, which is socialism.”
One night, Boris Cerni, the Bloomberg correspondent who ambushed Benmosche at his vineyard in the summer of 2009, stops by. The video had been great for his career, less so for Benmosche’s. The Obama administration was horrified by the headlines about the “tone deaf” vacationing CEO as well as the interview Benmosche subsequently gave to Reuters, in which he showed off Villa Splendid’s twelve bathrooms (“Women go wild when they walk in here”). And they were livid the following Monday, when Bloomberg began publishing a series of articles about the town-hall meeting he’d given in Houston, during which he blamed federal regulators for the financial crisis and spelled out what he’d say if he ever got in a room with Andrew Cuomo, who’d threatened to subpoena the names of Financial Products employees receiving bonuses. (“I will tell you, there won’t be a nice word.”) Or if the “crazies” in Washington talked to him like they did Liddy. (“You can stick it where the sun don’t shine.”)
Millstein called Benmosche in Croatia. “You’ve got to stop,” he said wildly.
“I have stopped,” Benmosche said serenely. Millstein could hear the cicadas chirping in the background. Benmosche explained that the reporter had gotten hold of a tape of the town hall and was publishing one quote at a time.
Millstein stopped breathing. “There’s more?”
There was just one more thing, about a meeting that weekend where Benmosche had boasted that “a part of his anatomy was bigger than the government’s.”
“I’ll tell you exactly what I said,” says Benmosche. “I said, ‘They may have big balls, but my balls are bigger.’ ”
“Those were the darkest days of my career at the Treasury,” Millstein now says.
But AIG employees loved it. “He was like a wild man,” says Jay Wintrob, the CEO of SunAmerica, one of AIG’s many subsidiaries. In between threatening to harm public officials, Benmosche was talking about how to pay off AIG’s debt. “I would say he was the earliest guy out there that said, ‘We can repay all of it. There is a future here.’ ”
When things calmed down, even Washington began to see a payoff. “The guy’s crazy,” one of the Treasury Department’s public-relations guys told Millstein, who began, dejectedly, to explain. “They were like, ‘No no no no. It’s good. He’s inoculated himself. Congress will never call him down now, for fear he’ll scream at them.’ ”
This was an outcome that satisfied Benmosche, who now talks about this period as if he had planned it all along. “I always knew I was going to say all these things, be pretty aggressive,” he says over dinner in the formal dining room. “Because saying the government’s in charge, it just wasn’t working.”
“Governments!” shouts Fernando, who is by now quite drunk. “Government are coming to the point in which they are going to control everybody!”
Benmosche smiles at him indulgently. “It’s like Indiana Jones,” he says, referring to the scene in which one guy does all this fancy swordplay and Indy just takes out a gun and shoots him. “Too many people, they’re standing there with the stupid sword. You gotta get the gun.”
Once in the states, Benmosche began to assemble his team. One member was Brian Schreiber, Hank Greenberg’s former right-hand man. He’d fallen out with his mentor, who felt his staying at the company was disloyal, but Benmosche appreciated that he’d been there for twelve years and had been a vociferous opponent of Project Destiny.
For help with the mess at Financial Products, Sarah Dahlgren suggested Peter Hancock, a former JPMorgan executive described as the “intellectual godfather” of the credit-default swaps that brought AIG low, a fact that now seems faintly embarrassing. “I like the idea of doing something that was really …” British-accented and exceedingly polite, he searches for the adjective. “Worthwhile.”
Tom Russo was in a similar frame of mind. Since the blowup of his firm, the former general counsel of Lehman Brothers had consulted on the film Arbitrage and written a grimly detailed book about the national debt. “It’s boring, I know,” he says, sighing in the manner of a man who has accepted that he alone must bear the weight of unbearable knowledge. Russo had no plans to go back to Wall Street but found himself unexpectedly inspired by Benmosche’s argument. “When Bob talked to me about what he wanted me to do, he talked about it like, ‘It’s going to be hard, but it’s going to happen,’ ” he says, his Eeyore eyes animated. “I remember thinking, This guy can sell anything. Because he actually convinced me. Which is very, very hard to do.”
Both Hancock and Russo speak of the job almost as though it were a public service. “If you’re from Lehman, where you’ve seen death, this potential for growing—you get a different sensation,” Russo says. “To participate in reviving a company and being in service to the country and paying back the taxpayer, that is something that, in a short life, why would you miss? Even though I could not exactly explain to myself how we would do it.”
Of course, this was not a charitable endeavor. “I told the Treasury, ‘I don’t work for free,’ ” Benmosche says.
Money has been a driving force in Benmosche’s life, as it usually is for people who used to have none. Like Greenberg, who grew up on a farm fifteen miles from the motel Benmosche’s family ran in Monticello, New York, he’s built his fortune mainly as a cushion against the memories of childhood privation. He started working at the motel at 10, after his father died unexpectedly, leaving his mother with four children and $250,000 in debt. In high school, he worked at the motel and drove a Coke truck, then joined the Army, where he absorbed the writings of Ayn Rand. “I don’t read much,” he says. “But that blew me away.” His work as a communication specialist in the Army gave him the skills to get his first job at Arthur D. Little. Even after he started making money, at Chase Manhattan, Paine Webber, and MetLife, “I was tense all the time,” he says. “When you grow up struggling with debt, you never want to go back,” he adds. “Finding myself with enough money that I don’t have to worry about things anymore is like when you take off a wet pair of shoes. It’s very relieving until you have to put them back on again. There’s nothing worse than putting on wet boots.”
Benmosche was so notoriously frugal that soon after they got married, his wife Denise granted him a divorce just to avoid unfavorable tax laws. “We were in the hotel in Santo Domingo, and I said, ‘Oh, look, honey, we can get a divorce for $400,’ ” she says. “I knew if we didn’t go through with it, he would be so angry come April 15.” Benmosche pulls a sitcom-husband face. They remarried the following year, although for the past ten they’ve had what he calls an “off-and-on relationship” that seems, at least in Croatia, to be mostly on. Still, Denise lives in Manhattan, while Benmosche, who has various “female companions,” lives mainly in tax-friendly Boca Raton. I’m wondering how rude it would be to ask if finances had anything to do with their not getting a second divorce when Benmosche comes up with an anecdote he says describes his “philosophy of life,” from when he was driving the Coke truck back in high school. “Senior year, they call to tell me they cut my commission,” he says. “I was working at the hotel, so I said, ‘Eh, you know, I’m not gonna take the job then.’ They were shocked. They said, ‘What do you mean?’ I said, ‘I’m not doing the job for that kind of pay.’ So within five days I get a phone call. ‘Okay, you win. We’ll pay you what we paid you last year. Please, you gotta come back.’ So I go back and I’m working all day, no break. All of a sudden one day, there’s a heavyset guy in the yard.”
It was a member of the union, telling him that he had to join.
“I said, ‘Actually, I don’t believe in joining the union,’ and I go to get in the truck. He says— ‘Until you sign the papers, this truck ain’t leaving.’ And he stands behind the truck. He says, ‘We’re here to protect the workers.’ I lost it. I said, Where the fuck were you three weeks ago?!’ He’s still standing there. I’m screaming at him I get in my truck. He jumped out of the way, inches before I hit him. Thank God I didn’t kill the guy. Never came back. So,” he finishes. “When you think about the bonuses—I made more money because I worked harder. First one out, last one in, always selling another case.”
He chuckles softly to himself. “I still think about it,” he says. “I still say to myself, That’s wrong!”
That he almost ran the guy over?
Benmosche looks surprised. “That he wanted me to join the union.”
Fortunately for Ken Feinberg, the government-appointed “pay czar,” Benmosche no longer had a truck. The two already knew one another from Benmosche’s days at MetLife, and Feinberg was one of the first people Benmosche called when he agreed to take the job at AIG. “ ‘You have to promise me you won’t fuck it up,’ I told him,” Benmosche says. “And he says to me, ‘I won’t, Robert!’ in his little Boston Jewish-kid voice.”
By the fall, Benmosche had not received approval for his pay package or that of his top executives, and he was beginning to feel aggrieved. Compounding his irritation was a battle he was fighting with Treasury over his use of the corporate jet. After the Great Auto CEO Debacle of 2008, the government had put its foot down on private-jet use by CEOs of TARP-supported companies, and when these onerous restrictions threatened to thwart his ability to make his granddaughter’s birthday party in Chicago, he exploded. “I said to Jim, ‘Here is the deal,’ ” he recalls. “ ‘I’m going to go and see my granddaughter, and I’m going to take that plane and shove it up your fucking ass. And everyone else’s ass. You are going to break my banana over this shit?’ ”
When Feinberg finally came back to him with a plan that dictated, among other things, that AIG slash salaries by 91 percent for its top dozen executives and pay all bonuses in stock, Benmosche called him, pissed. “You said you weren’t going to fuck it up,” he yelled. “And you are fucking it up!” PricewaterhouseCoopers, he told him, was threatening to sound alarms over the company’s inability to retain employees, and now four key people were threatening to walk. “He said, ‘Robert! I am not your problem.’ I said, ‘Ken, you are the pay czar.’ And he said, ‘I am telling you I am not your problem. Figure it out.’ ”
Benmosche took this to mean that, as he puts it, “something sinister” was going on at Treasury. Someone wanted to see him humbled. Well, Benmosche was having none of that. In a board meeting in early November, he laid down his trump card. “I’m done,” he told them.
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.”
Even Greenberg started to seem happy with the plan. “I talk to him once a month or so,” Benmosche says. “I call and say, ‘I just want to tell you something, I’m really pissed. You always talk about what great people you had and they’re not so great when it comes to this.’ He says, ‘I’m gonna come over there and stick this up your ass and rarararrararararra,’ ” he growls, then smiles. “We really go at it. It’s fun.”
Then Benmosche was diagnosed with cancer.
He wouldn’t say what kind. As the head of a public company, he had to admit he was ill, but he wouldn’t give specifics, otherwise the actuaries on the company’s own payroll would begin to tally up how long he had left to live. Some people were anyway. “Joann Lublin wrote in The Wall Street Journal implying I should have done the right thing and resigned,” Benmosche sniffs. “Because I’m going to die anyway. Why make it awkward?”
Benmosche says he was “devastated” by the diagnosis. But outwardly, he did for himself what he had been doing for AIG: projected an image of health. “I feel good,” he told interviewers while trying to suppress hiccups from the chemotherapy. When the treatment gave him a skin condition, he grew a beard to cover it and went back to work. “I just didn’t want to spend a lot of time thinking about cancer.”
There was plenty to focus on at AIG, starting with the ongoing saga of AIA. At the beginning of that year, the chairman of AIG’s board, Harvey Golub, was furious when Benmosche nonchalantly informed him that Prudential had offered $34 billion, most of it cash, for the Asian life-insurance property, which he had all but accepted without the board’s input. “He said, ‘Why didn’t you ask me first?’ ” Benmosche shrugs. “I said, ‘I had nothing to ask you.’ ”
Benmosche and Golub, the former CEO of American Express, had never gotten along. Golub was a little too hands-on for his taste, and Golub felt Benmosche made rash, emotional decisions. “Harvey is so analytical,” says Russo, who counts Golub as a friend. “He felt as chairman that he should know things and question things.”
When they brought the offer to the board to vote on, Golub voted against it. He was skeptical of Prudential’s ability to come up with the cash, and suspected it was the first in a series of negotiations that, if they went any lower, might spoil the value of an IPO down the line. When half the board sided with the chairman, Benmosche simmered. What really pissed him off was Golub turned out to be right: Prudential’s shareholders balked at the price. When Benmosche came back with its reduced offer, the entire board voted against him, an episode that Businessweek called an “embarrassment for Benmosche.”
At the next board meeting, he presented the board with another ultimatum: Either the chairmen went or he did. “Only one of us is going to make it through this,” he said, with Golub sitting right next to him. “You have to make a choice.”
Once again, the board panicked. That night, Millstein took Golub, an old friend, for dinner to gently nudge him in the direction of the door. “You really want to put this company through its fifth CEO in five years?” he asked. Golub chewed thoughtfully.
“He’s going to do this again six months from now, you know.” he said. “Every year from now.”
When Millstein arrived the next day, he was told the issue had been resolved. He was relieved that Golub had done as he asked. At the end of the day, he packed up his things and waved good-bye to Benmosche, who beckoned him over. “I won’t be here when you get back,” the CEO hissed. “I have written my letter of resignation. It’s not resolved.”
Millstein stared at him. “Go to your office,” he said through gritted teeth. Then he called Golub out of the meeting.
“What’s going on?” he asked.
“I haven’t decided,” Golub said. “If he’s decided, that’s the decision.’”
“You go to your office,” Millstein snapped. He went to inform the board they needed to make a decision. He’d barely finished speaking when the boardroom doors swung open. “And there’s Harvey,” Millstein recalls. “And he says, ‘I would like the opportunity to talk to my board.’ So Sarah Dahlgren and I go to get up, and he says, ‘No, I want you and Sarah to be here. I really think this is important we all think this through together. Don’t get up.’ I’m like, please let me get up.”
Golub was emotional as he relayed his concerns about Benmosche, and he spoke at length. When he stopped, one of the directors, Morris Offit, stood up. “He said, ‘Harvey, I don’t think there is anyone on this board that Bob likes less than me,’ ” recalls Millstein. “ ‘And I don’t think there’s any member of this board that likes Bob less than I like Bob. But he’s done a great job, rebuilding the management team, rebuilding the spirit of the firm, giving these guys energy and direction and a sense of purpose again. Harvey, I think the world of you, but I think for the good of the firm you have to resign, and I reach this conclusion reluctantly because I count you as a friend, and Bob and I are not friends.’ ”
Golub typed his resignation letter and gathered up his things. Benmosche had won again. “There’s no ‘we’ in CEO,” he says smugly.
In the next few months, they sold Alico to MetLife for $15.5 billion, then took AIA public. Benmosche priced the IPO deal on the phone while getting a round of chemotherapy. “We raised $25 billion in cash,” he says. “We’ll wind up with about $33 billion. It’s good, but $35 billion and getting it done two years ago would have been better.”
This fall, almost exactly four years after the financial crisis, the bailout of AIG was declared a success. “A good bailout,” as one Bloomberg anchor put it, as if there were such a thing. On the heels of the news from the Federal Reserve and Treasury, AIG announced that it would once again sponsor a sports team for the first time since it was forced to dump Manchester United. Granted, it was the New Zealand All Blacks, which have a black-on-black logo, but still, baby steps. The subsidiaries Chartis and SunAmerica are both preparing to take back the AIG name. And Benmosche is finally getting the hosannas he has always believed he deserves.
Even Morris Offit has converted. “I don’t want to get too theological,” he tells me. “But he’s kind of like Moses.” (The Charlton Heston version, he notes. “With the horses and everything.”)
When I see Benmosche in September at a gala in New York, he’s beaming. “The morale of the company is sky-high,” he booms. He doesn’t even seem bothered that people are touting the sale as an accomplishment for the Obama administration and suggesting its timing was politically motivated. “George Bush took credit for it, too!” he laughs. “I would say that Geithner is probably the most pleased, because he’s off the hook,” he says. “I know he didn’t think it was possible to pull off. But nobody gets credit for AIG. If it was up to the government we wouldn’t be here today. The government would never have gotten their money back. They shit on us all the way through it.”
Well, maybe he’s a little bothered. But he magnanimously offers to share the credit. “People are saying its all about Bob,” he goes on. “If anyone deserves credit it’s Sarah Dahlgren and Jim Millstein. In spite of the people they worked for, we got things done. I’m not being modest—I mean, I did have a lot to do with it.” At which point he spins off to celebrate his “happy ending,” as a Treasury representative called it the Times.
AIG’s dependence on the U.S. government is still far larger than Benmosche would ever care too admit. As one bond manager recently told Bloomberg about the still-too-big-to-fail company, “Having the government as a creditor? That’s a great place to be.” And though AIG is half its former size, it’s still gigantic, and the view from inside the company isn’t uniformly sparkling. “It’s a mess,” one consultant who has been working in one of AIG’s subsidiaries tells me over drinks recently. A young woman with an impressive resumé, she’d taken a job as consultant at AIG’s in order to move to New York. “AIG is a jobs program for consultants,” she laughs. “That’s what everyone calls it!” She goes on to describe a “dysfunctional” atmosphere, where a largely checked-out workforce regularly shrugs off mistakes saying things like, “If we were any good, we wouldn’t be working at AIG.” A guy in her department appears to do literally nothing—he brings in his own laptop and spends his days surfing the web and talking about strip clubs and how much he drank in Cancun last weekend. “These aren’t people making millions and millions in bonuses,” she says. “They’re people who just think, you know, I have this job, the economy is bad, I can’t be selective, there’s a nice paid vacation. It’s like,” she gropes for the words. “A government job.”
But even this consultant seems to be rooting for Benmosche and hopes her assessment will reach the CEO. “He seems like he wants to do the right thing,” she says, earnestly. On Wall Street, things are only worth as much as people care to believe. “If Bob did nothing else, he has made people believe in a vision,” says Tom Russo, sitting in his office, high above a street that, against all odds, is still bustling.