The Volokh Conspiracy - Did Eliot Spitzer Contribute to AIG's Demise?

The New York Sun thinks so in "Bring Back Greenberg":

As America was racing toward the nationalization of what is left of American International Group, we couldn't help think of Eliot Spitzer. Among all his mistakes, it's hard to think of one more catastrophic than his decision to force Maurice "Hank" Greenberg out of the leadership of AIG. The picture since then has not been a pretty one. As Mr. Greenberg put it yesterday in a letter, "In a little over a year, I, and other shareholders, have watched the company that I helped build over 35 years into the largest and most successful insurance company in history and one of the strongest and one of the most profitable companies in the world lose over 90% of its value."

It would have been another matter had Mr. Spitzer — or anyone else — found any wrong-doing by Mr. Greenberg. But they didn't. Instead, Mr. Spitzer's raid on AIG resulted in the installation of new management that, one can say at this point, just wasn't up to the job. As Mr. Greenberg put it in his letter yesterday to AIG's chief executive, Robert Willumstad: "Despite repeated assurances from management and the company that everything was under control, it is now clear that nothing was under control."

Client Number 9 seems to be weathering the financial storm much better than AIG's shareholders:

"When he was attorney general he was on a witch hunt, he'd go after anyone he could to get headlines," said Senate Majority Leader Dean Skelos. "I look at the pattern form when Hank Greenberg went out, not just the crisis now, and the stock plummeted. It cost taxpayers hundreds of millions of dollars in our pension system."

Spitzer, silent since his resignation March 17 after being implicated in a federal prostitution investigation, has also been blamed for contributing to a state budget crisis this year. Now, Spitzer is working for his millionaire father in Manhattan real estate while the prostitution probe continues. It was just two years ago he carried a historic margin of victory over Republican John Faso.

As news commentators have noted, maybe AIG would have capsized even with Greenberg at the helm. Some former employees have said that AIG was doing credit swaps while Greenberg was still around. But his removal certainly doesn't seem to have helped. In retrospect it seems like a major mistake to have driven Greenberg from AIG. But it is not just in retrospect--Spitzer's obsession with this case at the time was roundly criticized (he went after Greenberg for issues unrelated to AIG and it has been reported that he strong-armed AIG to throw Greenberg under the bus even though he couldn't prove anything).

	[Todd Zywicki, September 18, 2008 at 3:50pm] Trackbacks Did Eliot Spitzer Contribute to AIG's Demise? The New York Sun thinks so in "Bring Back Greenberg": As America was racing toward the nationalization of what is left of American International Group, we couldn't help think of Eliot Spitzer. Among all his mistakes, it's hard to think of one more catastrophic than his decision to force Maurice "Hank" Greenberg out of the leadership of AIG. The picture since then has not been a pretty one. As Mr. Greenberg put it yesterday in a letter, "In a little over a year, I, and other shareholders, have watched the company that I helped build over 35 years into the largest and most successful insurance company in history and one of the strongest and one of the most profitable companies in the world lose over 90% of its value." It would have been another matter had Mr. Spitzer — or anyone else — found any wrong-doing by Mr. Greenberg. But they didn't. Instead, Mr. Spitzer's raid on AIG resulted in the installation of new management that, one can say at this point, just wasn't up to the job. As Mr. Greenberg put it in his letter yesterday to AIG's chief executive, Robert Willumstad: "Despite repeated assurances from management and the company that everything was under control, it is now clear that nothing was under control." Client Number 9 seems to be weathering the financial storm much better than AIG's shareholders: "When he was attorney general he was on a witch hunt, he'd go after anyone he could to get headlines," said Senate Majority Leader Dean Skelos. "I look at the pattern form when Hank Greenberg went out, not just the crisis now, and the stock plummeted. It cost taxpayers hundreds of millions of dollars in our pension system." Spitzer, silent since his resignation March 17 after being implicated in a federal prostitution investigation, has also been blamed for contributing to a state budget crisis this year. Now, Spitzer is working for his millionaire father in Manhattan real estate while the prostitution probe continues. It was just two years ago he carried a historic margin of victory over Republican John Faso. As news commentators have noted, maybe AIG would have capsized even with Greenberg at the helm. Some former employees have said that AIG was doing credit swaps while Greenberg was still around. But his removal certainly doesn't seem to have helped. In retrospect it seems like a major mistake to have driven Greenberg from AIG. But it is not just in retrospect--Spitzer's obsession with this case at the time was roundly criticized (he went after Greenberg for issues unrelated to AIG and it has been reported that he strong-armed AIG to throw Greenberg under the bus even though he couldn't prove anything).