Hank Greenberg rattles the tin cup:
In the WSJ, Greenberg, formerly the chairman and CEO of American International Group (AIG) writes
: (excerpts, emp add)
AIG Needs a New Deal
To date, the government has shown everything but a consistent approach. It didn't give assistance to Lehman Brothers. But it did push for a much-publicized and now abandoned plan to purchase troubled assets. The government also pushed for a punitive program for American International Group (AIG) that benefits only the company's credit default swap counterparties.
The Citi deal makes sense in many respects. The government will inject $20 billion into the company and act as a guarantor of 90% of losses stemming from $306 billion in toxic assets. In return, the government will receive $27 billion of preferred shares paying an 8% dividend and warrants, giving the government a potential equity interest in Citi of up to about 8%. The Citi board should be congratulated for insisting on a deal that both preserves jobs and benefits taxpayers.
The government should instead apply the same principles it is applying to Citigroup to create a win-win situation for AIG and its stakeholders.
The role of government should not be to force a company out of business, but rather to help it stay in business so that it can continue to be a taxpayer and an employer. This requires revisiting the terms of the federal government's assistance to AIG to avoid that company's breakup and the devastating consequences that would follow.
The Citi rescue was widely criticized for being a sweetheart deal for shareholders and executives, and it was generally conceeded that the government could have done better (perhaps through an outright purchase). In any event, the Citi rescue is now being used by people like Greenberg to argue for similar shareholder bailouts of other troubled firms.