“To be honest, AIG was the scariest one of all that weekend,” a Treasury Department source told me. “There was no real regulator involved. I mean, insurance was regulated in all fifty states, but there was no common regulator. I remember looking at Hank and saying, ‘We’re not going to save an insurance company, are we?’ He looked at me like I was crazy, because I had no idea the tremendous reach AIG had.” Incidentally, I later learned that there were four hundred agencies overseeing AIG, and they all missed the sizeable leverage at the company’s financial products division. Four hundred agencies! It wasn’t just the Wall Street executives who had dropped the ball. Regulators had messed up royally.
Paulson understood AIG’s value all too well. “Every construction project that’s insured by AIG will stop tomorrow if they fail,” he said. “And the building you live in right now, I guarantee it’s insured by AIU Holdings, which is the property and casualty insurance group that’s in one hundred twenty countries. And that’s only the tip of the iceberg.”
In fact, the tentacles of AIG reached into every major country around the globe. It was composed of many insurance companies, covering millions of retirement accounts, life insurance customers, and other entities. Its balance sheet was more than $1 trillion. AIG had made huge investments in credit default swaps to insure mortgage-backed securities.
Paulson picked up the phone and called AIG’s CEO, Bob Willumstad. “Come on over,” he said. Willumstad and his advisers arrived at 4:30 Saturday and sat down with Paulson, who was feeling the weight of the crisis. He had started out the weekend trying to save Lehman Brothers. Now he had a much bigger problem. AIG was suddenly squeezing all the oxygen out of the building.
Hank Greenberg felt an enduring anger that had survived three years of exile from AIG, the company he had built into the largest insurance and financial services enterprise in the world. That anger had only intensified through the mounting financial crisis. Small-framed, but strong and passionate, Greenberg, at eighty-three, had more drive than most men half his age. On Saturday, September 13, he was at his office at C. V. Starr, overlooking Park Avenue. He’d made the decision to stay close to his business that weekend. With so much going on, he felt he’d better stand by. He was aware that AIG was having trouble, and that Willumstad was trying to arrange a meeting with the feds to make the case for a loan because he had been unsuccessful in raising funds on the outside. Greenberg knew something very few people appreciated at that point—that a failure at AIG would make the Lehman collapse look like a day at the beach.
As he drank tea from delicate china cups, studied reports, and made calls, Greenberg considered how the people at AIG were handling the crisis. He was not pleased. They weren’t thinking! They were desperate, and he knew from long experience that desperation was fatally contagious. The one thing you had to do, he believed, when all around you was going awry, was to keep your wits about you and stay calm. You didn’t react to a crisis by becoming part of the crisis, but by stepping away from it, viewing it dispassionately, and making decisions from a place of objectivity.
Greenberg had to work hard himself at maintaining that dispassionate view. He wasn’t usually an overly emotional person, but he was emotional about AIG. The company was his life’s work, the canvas upon which he produced his vision, and it had succeeded brilliantly. After Greenberg took the reins from the founder and his mentor, Cornelius Vander Starr, in 1968, he had put AIG on the map, breaking into hard-fought markets like China and Russia long before others did. Too crusty to be personally popular, Greenberg was nonetheless admired for his business acumen. But he was also feared. When he was at his peak at AIG, everyone knew you didn’t cross Hank Greenberg.
Then, in 2005, crusading New York attorney general Eliot Spitzer went after Greenberg with accusations of accounting fraud. The allegations would never be proved and were later dropped, but the mere hint of wrongdoing was enough to panic AIG’s board. With barely a thought, Greenberg was forced out and replaced by Martin Sullivan, a fifty-year-old British-born executive who worked for Greenberg. Believing Sullivan had helped drive him out, Greenberg never felt the same about him again, but even without the personal animosity, there was no question Sullivan was ill-equipped to run a global insurance powerhouse. From his new perch as the head of the financial services firm C. V. Starr & Co., and as one of AIG’s largest stockholders, Greenberg watched with alarm as the new management made one bad decision after another. In June 2008 Sullivan was ousted and replaced by Willumstad, a former lieutenant of Sandy Weill’s at Citigroup. Willumstad had gotten along well with Greenberg and had also been backed by Greenberg’s powerful ally Eli Broad. (Greenberg’s AIG had purchased Broad’s asset-management company, SunAmerica, in 1999.) Willumstad talked about repairing the relationship with Greenberg once he became CEO—something Greenberg was eager to do. He wanted to help AIG. To be clear, Greenberg wasn’t just being altruistic or paternalistic. His personal wealth was completely tied up in AIG, and it was sinking with the stock price. But
