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Robert Benmosche has been chief executive of American International Group for only three months. And yet in that time, he has made more colorful, provocative and memorable statements than most CEOs provide in a lifetime. Within days of taking the job, Benmosche was pushing back against AIG's government overseers in company meetings and in multiple interviews from his Croatian vacation villa.
But the comments, as colorful and blunt as they seemed, had their purpose. After all, CEOs with as much experience as Benmosche rarely make statements publicly, out of pure emotion.
Even his latest outburst (made to the AIG board last week and reported by the WSJ today that he is threatening to quit because he is fed up with government constraints on compensation) seems equally as calculated.
Is Benmosche attempting to rally the troops, or is he really going to quit and become a martyr for the numerous executives now toiling under government control?
Well, consider some of Benmosche's more provocative statements to analyze the strategy behind them:
1) “I'm appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn't have come in in the first place.”
[Strategy: The presumption had been that because AIG was a "motivated seller," buyers could swoop in to purchase assets on the cheap. Here, Benmosche signaled that he was no pushover, and that he wouldn't sell valuable assets just to sell them. Of course, the risk is that he antagonizes the American public. The federal government bailed out AIG because the complex financial products it had loaded up on its balance sheet threatened the stability of the financial system]
2) “It's time the people in Congress stopped talking about you as the problem, because you're the solution,” he told employees in August. “It's not your fault, it's their fault, it's the regulators' fault.”
[Strategy: Rally the flagging spirits of AIG's employees who are needed to help turn around the company. The risk is that Benmosche is seen as a revisionist rewriter by glossing over AIG's troubled history and that he loses credibility. In fact, many AIG employees--particularly in the financial products divisions --really did take on too much risk and that this is why the company--and the financial system as a whole, required a costly bail out.
3) In September, Benmosche referred to federal officials as “those crazies down in Washington.”
[Strategy: Unclear, as Benmosche risked creating bad blood between AIG employees and the Federal Reserve and Treasury officials overseeing the company's restructuring.
Indeed, the remarks drew an unusually sharp rebuke from White House economic adviser Austan Goolsebee: "I don't know what [Benmosche] is referring to when he’s saying the government people are ‘crazies,’ but I would just caution them not to be too cheeky because, the government, the American people saved the day and they didn’t do it because they liked AIG or they thought they were really great guys who deserve hundreds of billions of dollars,” Goolsbee said in an interview with the Washington Post. “I mean, they did it to prevent the economy from melting down, and I think people ought to be a little more circumspect in their pronouncements about the government]
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Strategy: get himself paid either by getting fired or by saying, next year, that the whole thing failed because of the politicians.
I have a proposal. Offer him a lot of money if he can repay the government in 3 years but nothing until then. If the fails, he must pay half a million dollars. He will not take the deal.
The regulators and legislators, over a span of decades, inflicted multiple gaping wound on the American economy. Then they come along and put a giant bandaid on it, and proclaim, “We had to… YOU made us do it! But look! We’ve saved the economy… we are the saviors”. As the barely living corpse of the economy stands there, still oozing blood at a prodigious rate from around the edges of this very pretty bandage, the regulators stand there and hold a gun to the head of business leaders, screaming, at the top of their lungs, “STOP BLEEDING!”, and the American public stands there screaming at the regulators, “MAKE THEM STOP BLEEDING”, all the while completely ignoring where the wounds came from in the first place.
You can not “stimulate” yourself out of a depression that was caused by the state trying to engineer the economy by stimulating various other things like home ownership. You can’t cure a ill man by feeding him more poison. It will not be long now before the farce of putting a bandaid over gaping wounds becomes obvious, when it falls off and the life blood of America begins pouring out again. What will the great savior of the state do then? Stay tuned…
Why will the news media not report that, yes, the redulators DID instigate the problem in requiring lending institutions to lend to those who had no business borrowing. Granted AIG employees took advantage of the risky investments, but the AIG employees DID NOT create the risky investments–regulators did.
John Galt lives!
Deal Journal is an up-to-the-minute take on the deals and deal makers that shape the landscape of Wall Street, including mergers and acquisitions, capital-raising, private equity and bankruptcy. In short, wherever money changes hands. Deal Journal is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal's Michael Corkery is the lead writer, with contributions from other Journal reporters and editors. Send news items, comments and questions to deals@wsj.com.
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