Former AIG CEOs testify about firm’s collapse
Two former chief executives of insurance giant American International Group Inc. blamed a host of factors for the collapse of the firm as they testified before the House Oversight and Government Reform Committee today.
Two former chief executives of insurance giant American International Group Inc. blamed a host of factors for the collapse of the firm as they testified before the House Oversight and Government Reform Committee today.
Martin Sullivan and Robert Willumstad blamed the company’s collapse on mark-to-market accounting rules, which require companies to value their securities at current prices in distressed situations.
This forced the company to write down the lost value of its bad assets.
Both Mr. Sullivan and Mr. Willumstad said that the losses led to the slew of credit-rating downgrades that sent the company’s shares plummeting.
Mr. Sullivan, who was AIG’s chief executive for three years ending in June, attributed the company’s breakdown to a “global financial tsunami” that was created by poor lending and borrowing practices, illiquid markets, the absence of credit and a loss of investor confidence.
Mr. Willumstad, who ran AIG from June until last month, said that he didn’t think that the company could have done anything differently to avoid a government bailout.
“The market seizure was an unprecedented global catastrophe,” he said. “We took every step we could to protect AIG’s shareholders.”
On Sept. 16, New York-based AIG accepted an $85 billion revolving credit facility from the Federal Reserve, suspended payments on its common stock and gave the government a 79.9% equity stake in the company.
AIG has already tapped $61 billion of that credit line and must sell businesses to repay the loan.
Mr. Willumstad was fired and replaced as chief executive by Edward Liddy.
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