It’s a safe bet former chairman will uncover AIG bailout scandal 

It doesn’t take long in talking with former AIG Chairman Hank Greenberg to realize he’s Exhibit A for the proposition that they don’t make them like they used to.

Greenberg built the world’s largest insurance company, taking it public in 1970 with a market value of $300 million and creating in the decades following a $180 billion masterpiece with operations, subsidiaries and spinoffs in 130 countries. Imagine GM with 80 percent of the world auto market and you begin to grasp what AIG was.

He recently attended a private dinner where he confidently responded for more than an hour to prickly questions posed by the high and mighty, like China’s ambassador, and the low and mean, represented by a gaggle of scribes who cover Wall Street and the economy.

What Greenberg most wanted to discuss, though, was one number and how it came about, the 79.9 percent ownership of AIG that Uncle Sam ended up with from the economic meltdown of 2008.

“AIG was loaned $85 billion at first, at 14.5 percent interest. If anybody charged that interest, and those are serious terms, they have prisons for people like that,” Greenberg said. “And the Fed took 79.9 percent of the company. I don’t know of anybody that issued an opinion on the 79.9 percent, why they were entitled to 79.9 percent, as far as I know it was just a done deal.”

Good question, especially considering what Greenberg calls the other “pieces of the puzzle” of what happened before the smoke cleared from the meltdown. Then-Treasury Secretary Hank Paulson and former New York Fed Chairman Tim Geithner threw hundreds of billions of tax dollars at Wall Street, allegedly to avoid the economy’s imminent collapse.

“On Day One, there were $700 billion that were going to buy toxic assets out of banks, but before you can even blink that was discarded and capital was injected into the banks — and some whether they wanted it or not,” Greenberg said.

A key element here, Greenberg said, was a 2005 decision by an obscure financial industry group, the International Swaps and Derivatives Association. Briefly, ISDA changed the rule on credit default swaps to require investment backers like AIG to pay off declines in value as they accumulated rather than, as before, at the end of their terms.

The result was devastating for AIG, which had, after Greenberg’s departure in 2005, invested heavily in CDSs backed by subprime mortgages and sold by, among others, Goldman Sachs, of which Paulson and Geithner were both alums.

When the real estate bubble burst in 2008 and AIG couldn’t make good on its CDS investments, Paulson and Geithner used rescuing AIG to launder billions of dollars into their old firm to rescue it from its subprime securities folly.

This has the makings of a scandal to dwarf Teapot Dome and Enron. But to get to it, the great disinfectant of sunlight must be focused on how government officials arrived at that 79.9 percent figure.

I wouldn’t bet against Greenberg having the last word here.

Mark Tapscott is editorial page editor of The Washington Examiner and proprietor of Tapscott’s Copy Desk blog at

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