Cramer Hammers AIG Founder Hank Greenberg

“AIG has been what we call in the business an up stock, meaning it has been one way up since they did the split, the 20 for 1 reverse and that’s because of endless unconfirmed rumors and just gossip, gossip that something good is about to happen. Emanating, frankly, from someone who should be made to, let’s say, be quiet immediately.

He’s the man who sewed the seed for its destruction. Even though he created the company, he’s the one who set up the rogue London office. He’s the one who commanded the company to insure financials. I urge you to go back to the 2007 analyst meeting to see how long this company was doing stupid, stupid things like ensuring banks to allow them to get around European capital requirements. Greenberg somehow takes no responsibility whatsoever, is never called out on this, and shamelessly hypes the company as undervalued to every media outlet imaginable. This man is really off the reservation.” — CNBC’s Mad Money 9/23/2009

Without naming names, the often fiery and always controversial Jim Cramer turned his outrage on another controversial titan, AIG’s (AIG) founder Hank Greenberg. The problem as Cramer views it, is that Greenberg was the one that led the company into its risky derivatives business, but he rarely takes any heat for these decisions. Furthermore, Greenberg has proposed a plan to reduce AIG’s debt to the government, and with the stock surging more than 20% on Monday he is being hailed in some circles as a potential savior to the company.

As everyone is well aware, AIG was bailed out to the tune of $85 billion the day after Lehman Brothers fell, and they have since been bailed out three more times. To date taxpayers have lent AIG $182.3 billion, and after asset liquidations AIG still owes the government about $120.7 billion. Of course, there are doubts about whether AIG will be able to pay back the taxpayers anytime soon as they have sold off many valuable assets at fire sale prices. As Greenberg said in his statement back in April,

“Since the day the treasury announced its plan to liquidate AIG, value has been destroyed because AIG’s people and their relationships — AIG’s business — are leaving. The evidence is overwhelming and indisputable that the American taxpayer is an investor in a steadily diminishing asset.”

Greenberg’s plan is to ask for mercy from the government in the form of lower interest rates and a longer time-table for repayment. Rep. Edolphus Towns’ House Oversight Panel is reportedly going to push for up to 20 years to repay the restructured debt, instead of the original 5-year term. In so doing, there is a better chance that taxpayers get paid back, and AIG would have a much better opportunity to survive as a healthy business. Cramer’s outrage stems from the fact that you are rewarding the shareholders of this corporation that took far too many dangerous risks. Primary among the shareholder beneficiary is none other than Maurice “Hank” Greenberg, who is estimated to have made $588 million on the stock’s 21% rise on Monday.

While we understand Cramer’s concerns that bad actors get rewarded, this is what happens in the aftermath of the “too-big-to-fail” moral hazard. Greenberg should take much of the blame for his leadership of AIG that led them to need four unprecedented government bailouts. However, as taxpayers, we should all demand repayment, especially those of us who disagree with how the situation was handled in the first place. We doubt that the original plan to sell off AIG in bits is going to be able to get that money back (as the GAO stated in its latest report), so perhaps Greenberg’s approach would make the best of a terrible situation. Whether the government will bite on this deal is a different matter, considering Credit Suisse (CS) analyst Thomas Gallagher calls the Greenberg plan “farfetched” saying the terms of the loans are already favorable for AIG.

Original post

Comments

[logicalthought:]

Cramer and Greenberg deserve each other, as they're both experts in rewriting history.

Sep 23 12:36 PM

[madmilker:]

well, dipstick Cramer wusn't around back in 1919...and the only kind of hammer tat man could use is one tat came from Playskool. Tis ain't bout insurance...it's about the nice people of China.

Sep 23 12:39 PM

[twitee:]

AIG is nothing but the element of the Federal Reserve used to execute their acts indirectly. AIG was used as a tool to destroy the global financial growth of the BRIC countries...after all how can United State allow those countries to grow at double digit rates while US was growing around 2-3%.....accepting this fact or not we live in a world of financial wars my friends......So far US has succeeded....the next step is to devalue the dollar that those countries are holding and create a major inflation from within to make the home owners rich again to start the new cycle of the slavry economy......meanwhile Hard assets are the only safe place to be.....and remember for now Cash is Trash.

Sep 23 12:47 PM

[User 490445:]

twisted logic. if this is true we should have lent a gazillion dollards to the GSEs and the autos and given them an infinite time to pay it back. there are no guarantees that aig assets will be worth substantially more in 1-2 years time and they may be worth less. the govt should protect its senior status as a lender and forget about the common equity stake that is only a fraction of what was lent ot the company. AIG may yet crumble under the wieght of its PRIVATE debt, let alone the govt stake.

Sep 23 02:10 PM

[DaveBrit:]

"without naming names".....??? HE SAID THE WORD GREENBERG!!!!

Sep 23 04:40 PM

[BerkeleyBob:]

Under the leadership of "Hammerin" Hank Greenberg, AIG was no more and no less than an unregulated off-shore bookie that welched on its bets. He was forced to step down as CEO because of "accounting irregularities" ie, window dressing of reinsurance (largely unregulated) to prop up earnings. On this one, Cramer is right, but the remedy is difficult. AIG does have significant assets which could be spun off with returns to the taxpayers who have fronted many billions but in the present market, who wants to buy a profitable and large airplane lessor?

Sep 23 06:44 PM

[DonFurio:]

Look overall, this was better than having to nationalize a bunch of banks, and overall we will get the tarp money back, but we probably won't get the entire AIG back. I say, let's get back the most we can in 5 years, and let the gains on GS, Amex, JPM, etc take care of the losses from AIG.

Sep 24 08:47 AM

[Advill:]

C´mon, justify whatt you say.....if you can support it.


On Sep 23 12:47 PM twitee wrote:

> AIG is nothing but the element of the Federal Reserve used to execute
> their acts indirectly. AIG was used as a tool to destroy the global
> financial growth of the BRIC countries...after all how can United
> State allow those countries to grow at double digit rates while US
> was growing around 2-3%.....accepting this fact or not we live in
> a world of financial wars my friends......So far US has succeeded....the
> next step is to devalue the dollar that those countries are holding
> and create a major inflation from within to make the home owners
> rich again to start the new cycle of the slavry economy......meanwhile
> Hard assets are the only safe place to be.....and remember for now
> Cash is Trash.

Sep 24 11:26 AM

[Jake2:]

Greenberg appeared on Charlie Rose looking like somebody's rosy-cheeked grandfather, and Charlie Rose "confessed" they were friends. What followed was a joke of an interview where Greenberg said that he could "help" AIG but AIG "didn't like him anymore," or words to that effect. Sometimes in this business you get the feeling that the entire financial world is rotten, and everyone in it is a crook. Not Charlie Rose, of course, nor rosy-cheeked Greenberg, but maybe everyone else. Due diligence may not be enough. Abstinence.

Sep 24 11:44 AM

[Gravity404:]

JPM didn't take any money. Jamie is clean as a whistle.


On Sep 24 08:47 AM DonFurio wrote:

> Look overall, this was better than having to nationalize a bunch
> of banks, and overall we will get the tarp money back, but we probably
> won't get the entire AIG back. I say, let's get back the most we
> can in 5 years, and let the gains on GS, Amex, JPM, etc take care
> of the losses from AIG.

Sep 24 12:10 PM

[LSSJR:]

Cramer is way off the mark. Greenberg put limits on what the Financial Products division people were doing. After then NY AG Elliott Spitzer had Greenberg pushed out, the new execs let them go hog wild . While Greenberg ran AIG, it was probably the best insurance company and one of the best companies in the world. After he was forced out, the new execs got greedy and in two years allowed the one division to lose $500,0000,0000,000. How is that on Greenberg?

Sep 24 01:25 PM