WASHINGTON — Maurice R. Greenberg, the former chairman of the American International Group, said Thursday that the government’s $170 billion bailout had failed and that taxpayers would have been better off letting the company go bankrupt.
Maurice Greenberg, former chairman of A.I.G., told a House panel Thursday that the company was mismanaged after he left and that the Treasury and Federal Reserve had made things worse.
“It is clear that the current approach has not worked and cannot work in today’s environment,” Mr. Greenberg, who was ousted from A.I.G. in 2005, told the House Oversight and Government Reform Committee. “A.I.G., in my judgment, in the current plan, will not pay the taxpayers back.”
Refusing to accept any personal blame for his former company’s collapse, Mr. Greenberg insisted that A.I.G.’s problems stemmed from mismanagement after he left and that the Treasury and Federal Reserve had made things worse by trying to break the business up and sell it off in pieces.
He also disputed the statements of both the Treasury secretary, Timothy F. Geithner, and the chairman of the Federal Reserve, Ben S. Bernanke, that letting the company go bankrupt would wreak further havoc with the economy.
“There would have been a ripple, but it wouldn’t have been catastrophic,” Mr. Greenberg said. “I don’t think it would have been disastrous.”
Mr. Greenberg immediately found himself in a bitter long-distance fight with A.I.G.’s current, government-installed management. Even as he was testifying, A.I.G. accused him of playing a central role in A.I.G. Financial Products, the unit that caused the company’s collapse last year.
“Hank Greenberg continues to deny his role in allowing F.P. to write the multisector credit-default swaps which sowed the seeds for A.I.G.’s troubles,” the company said, referring to the financial products unit. It went on to denounce Mr. Greenberg as evading questions and lacking credibility as a business strategist.
“He refuses to acknowledge that he approved entry into the credit-default swap business, approved more than $40 billion of swaps written on C.D.O.’s containing subprime loans, and didn’t hedge or put up reserves against them,” the company said. Collateralized debt obligations are securities made from pools of loans and other forms of debt.
“We don’t understand how he can be viewed as having any credibility on any A.I.G. issue.”
The 83-year-old Mr. Greenberg has been locked in a bitter feud with his former company for months. A.I.G. is suing a company controlled by Mr. Greenberg, Starr International, seeking the return of 290 million shares of A.I.G. stock, as well as $4 billion that Starr received from selling other A.I.G. shares. The trial in that suit is scheduled for June.
But the mutual recriminations on Thursday were the most vitriolic and expansive yet.
Testifying for more than three hours, the former A.I.G. chairman cast himself as a rescuer rather than a villain. He attacked the strategy of both the current Treasury secretary, Mr. Geithner, and his predecessor in the Bush administration, Henry M. Paulson Jr.
“The failed plan ignored the key value driver of A.I.G.: its people,” Mr. Greenberg said in his prepared remarks. “Since the day the Treasury announced its plan to liquidate A.I.G., value has been destroyed because A.I.G.’s people and their relationships — A.I.G.’s business — are leaving.”
Mr. Greenberg also said that Edward M. Liddy, whom the government recruited as A.I.G.’s chief executive when the company was being bailed out last fall, “doesn’t have the background for what needs to be done.”
Mr. Greenberg asserted that he would have reduced or at least hedged A.I.G.’s exposure to credit-default swaps in 2005, when A.I.G.’s credit rating was reduced.
“A.I.G.’s business model did not fail; its management did,” he asserted. That provoked another scornful counterattack from his former company, saying that Mr. Greenberg’s assertions were “implausible,” “not grounded in reality” and at odds with his track record of not hedging A.I.G.’s bets on credit-default swaps.
