Good for the Money: My Fight to Pay Back America
April 12, 2016
Bob Benmosche tells the story of how he pulled AIG back from the brink of bankruptcy and engineered one of history's most astonishing corporate turnarounds.
Excerpt from Chapter One:
The Good News Is, You're Not Paranoid
Good for the Money: My fight to Pay Back America
by Bob Benmosche with Peter Marks & Valerie Hendy
St. Martin's Press
THE TRUTH WAS, I DIDN'T NEED THE JOB.
I was content in retirement, living in the house of my dreams on Croatia’s Adriatic coast, puttering around in my flip-flops, tending to the little side business we’d started, growing grapes for our own wine. But stepping back into the arena appealed to my sense of patriotic duty. Becoming CEO of American International Group—known by its universally reviled initials, AIG—would be an important service to the country. AIG had almost taken down the entire global economy as a result of the role of one of its divisions, AIG Financial Products, in the calamitous subprime mortgage market. Now, it was reeling under the weight of the astronomical $182 billion in bailout funds it owed the taxpayers. The company was in such disarray that it had burned through four CEOs in four years, the last one hounded out after a humiliating dressing down by Congress.
I would be CEO No. 5 in that line. Lucky me.
Sure, I knew that wading into this situation would be messy. I just hadn’t fully calculated the magnitude of the mess. In fact, on Monday, August 3, 2009, my very first day in AIG’s offices in Manhattan’s Financial District, the groundwork was being laid for an attempt at neutering my leadership. I would soon find that a powerful faction within the company was opposed to the direction in which I planned to take it. Hanging in the balance was the fate of what was then the world’s largest insurance company, a firm with a trillion dollars in assets and dealings in 130 nations.
Well, as the saying goes, no good deed goes unpunished. I didn’t want to start the job until October. But officials at the U.S. Treasury Department—now owners of 79.9 percent of the company’s stock— had other ideas. October? Impossible! The new CEO had to start when the man he was replacing, Edward Liddy, departed on August 10. So I agreed to their timetable. I arranged to start at AIG on August 3, a week before Liddy’s departure, on an unofficial basis. That way, I would spend some time in the first half of August getting to know employees in the various units of AIG around the United States, take the end of August to honor my commitments in Croatia, where I had retired to start a vine- yard, and then return full-time to AIG on September 8.
Not everyone was thrilled, me included. I still didn’t even have a salary and compensation package nailed down. But I made it clear I wasn’t going to alter this plan.
Little did I know my “vacation” in Croatia, which had the blessing of the government officials who urged me to take the job, would soon be fodder for an attack by my enemies on the board and elsewhere. Within days, news of the trip would be leaked to the media as evidence of more AIG profligacy, of the sense that the company—already on the defensive over its desire to pay contractually mandated executive bonuses—just didn’t get it.
Oh, I got it, all right.
It was the first salvo in a campaign from within the company to try to smother my leadership in its infancy, and scuttle the plan I was formulating. My goal was simple: for AIG to defy the odds and pay back America, in full. I knew that AIG was still a tremendously valuable company that had been dragged down by a couple of divisions that made really bad bets on mortgage-backed derivatives. These toxic contracts had become, in Warren Buffett’s colorful phraseology, the financial world’s weapons of mass destruction. By no means, though, did they reflect on the worth of the rest of the company. I intended to clean up the derivatives mess so that AIG could re-establish itself as one of the world’s premier insurance companies—and a mighty profitable one at that.
My ideas ran counter to those of some in the upper echelons of the firm. This faction wanted to unload huge portions of the company as fast as possible, at what I knew to be ridiculous, fire-sale prices. They had the backing of the Wall Street bankers who had made a fortune—$100 million at least—in consulting fees working for AIG and who were poised to make a lot more through commissions on the rapid sell-offs. Adding to the absurdity was that these were the very Wall Street vultures who had sold AIG the toxic derivatives to begin with! I have spent a veritable lifetime in the financial industry, so when I say that the buzzards were circling, ready to swoop in on AIG’s highly prized insurance entities and real estate holdings, I know of what species I speak.
Not even the U.S. government seemed averse to selling AIG units at bargain prices. The prevailing philosophy in Washington was, let’s recoup whatever we can as fast as we can. No less a figure than Treasury Secretary Timothy Geithner, one of the architects of the bailout, first as head of the New York Fed and then as a member of President Obama’s cabinet, privately expressed his strong doubts over AIG ever paying back its debt.
My feeling was quite different. I believed AIG could pay the government back—I wouldn’t have taken the job if I didn’t. I also figured out quickly that those at AIG who didn’t share that belief wanted me silenced, discredited, and shunted aside. Which reminds me of an old joke: A guy goes to his psychiatrist, and the doctor tells him: “I’ve got good news and bad news for you. The good news is, you’re not paranoid. The bad news is, they’re out to get you.”
I hadn’t pinpointed who specifically was out to get me. But by the time the story leaked in Bloomberg News the following week, with the headline “Benmosche Said to Start AIG Tenure With Croatian Trip,” I’d begun to get an inkling.
Over the next five years, I would do battle on many fronts in my fight to make the American taxpayer whole after AIG’s errors during the subprime debacle. Well before my tenure as CEO ended in September 2014, I’d made good on my vow: AIG had not only paid the country back, but also had settled the account with a $22.7 billion profit.
But there were bitter battles along the way.
From Good for the Money: My fight to Pay Back America by Bob Benmosche, with Peter Marks and Valerie Hendy.
Copyright © 2016 by Bob Benmosche.
Reprinted by permission of St. Martin's Press, LLC.
All rights reserved.
ABOUT THE AUTHOR
Bob Benmosche (1944-2015) was President and CEO of AIG from 2009 to 2014 and pioneered a strategy that saved the company from bankruptcy. A charismatic leader equipped with a keen emotional intelligence, he rallied a dispirited AIG workforce to achieve what few in the government imagined possible—full repayment of the company's debts to the government in three years plus interest. A distinguished executive who forged an outstanding career on Wall Street, he was formerly CEO of MetLife, which he took public.