The Rise and Fall of AIG

An inside account of the battle between an industry legend and a ruthless politician.

Maurice R. Greenberg and Lawrence A. Cunningham, The AIG Story (2013) 328 pp., $29.95.

Maurice R. “Hank” Greenberg is former chairman of American International Group (AIG), which under his leadership, beginning in 1967, grew into a global insurance and financial giant, with nearly $1 trillion on its balance sheets. In the process, Mr. Greenberg is credited with revolutionizing the insurance industry and preparing the way for globalization, doing business early on in countries such as Hungary, Poland, the Soviet Union—and, after Richard Nixon and Henry Kissinger opened it, China. Today Hank Greenberg is chairman and CEO of C.V. Starr & Co.

His co-author, Lawrence A. Cunningham, the Henry St. George Tucker III Research Professor at the George Washington University Law School, is the author of several well-received books and numerous articles for scholarly journals and publications such as The New York Times and The Financial Times.

Although the nature of their collaboration and divisions of labor led them to write this strong, fast-moving and well- crafted book in the third person, the result, we’re told in the preface, “is very much Greenberg’s story and a personal one at that.”

It’s also a remarkable one, with Hank Greenberg, a veteran of World War II and Korea, personifying what we can still call the American dream and the economic system that makes it possible. He believes in that system so fiercely that when at a U.S.-Russia Business Council meeting in Moscow in 1987 he was asked by Mikhail Gorbachev about how immigrants in America fared, he responded: “‘My great grandmother was actually from Russia….she left this country with little money in search of a better life, and went to America. Two generations later I have just arrived here in Russia from America on a private corporate jet. Which system do you think is better, the Soviet or American system?”

Although less confrontational, there are echoes here of the 1959 Nixon-Khrushchev kitchen debate, which drew international attention to the basic economic flaws in the Soviet system that led to its eventual collapse. Earlier, in part as a result of the Nixon-Kissinger China trip, Greenberg undertook his own China opening, with AIG and China agreeing on that country’s first foreign insurance contract. Greenberg forged business relationships with business leaders and government officials worldwide, operating in some 130 countries. He worked with all U.S. presidents from Nixon to Clinton to encourage open markets and free trade. He was also active in such nongovernmental organizations as the Council on Foreign Relations and the Center for Strategic and International Studies, and helped found the Center for the National Interest, which he has chaired for many years.

In all, Hank Greenberg’s story is essentially the story of the last half century—the defeat of totalitarian regimes and statist ideologies, the collapse of Communism, the subsequent drive toward free trade and open markets, in all of which Greenberg and AIG were significant and successful players. In all, by 2005, AIG was enjoying unprecedented prosperity, with Hank Greenberg one of the nation’s most admired and respected business leaders. But also in 2005, Eliot Spitzer, the ambitious, crusading New York attorney general, who had successfully prosecuted the mob (and picked up a few of their techniques and mannerisms along the way), was running for governor, and needed new targets for his media-savvy crusades. He settled on the banking and insurance industries—and zeroed in on AIG, for whose chairman Spitzer had an unexplained but intense personal dislike, often expressed in obscene and profane diatribes.

Waging his campaign against AIG and Hank Greenberg in the press, Spitzer pressured the AIG board to ask Greenberg to resign, threatening the board with massive governmental retaliation if it refused to do so. The request was made when Greenberg was out of town. Although initially stunned, he complied, realizing that refusal would put his company directly in the prosecutorial sights of a ruthless, campaigning politician, with the powers of his office and the press at his disposal, and the timorous AIG board in his pocket.

“It was clear to Greenberg,” the authors write, “that AIG’s governance was firmly, fully, and candidly in lockstep with Spitzer, whom Greenberg came to regard as a preening scion of outsized ambition.”

Spitzer, it was widely believed and never denied, intended to use the governor’s office as a stepping stone to the White House—an ambition not uncommon among New York governors. And for a time, given that he was a favorite of the press and the talk-show circuit and pursued what the authors call a “trial-in-the-media strategy,” it seemed possible. As Forbes put it, “The hallmark of a Spitzer trophy is victory by intimidation.” And with the active assistance of the media, he had rung up a number of those.

As the “Sheriff of Wall Street,” and an aspirant for higher office, Spitzer sold himself—and was sold—as the personification of morality and righteousness.

But then came the revelations—a high-end prostitute service; regular trysts in Room 871 at the Mayflower Hotel in Washington, D.C.; the shameless televised mea-culpa, with his humiliated wife standing behind him (it’s said that this scene inspired the TV series, The Good Wife). So much for morality and righteousness.