To hear Hank Greenberg tell it, there was never anything wrong with AIG, the massive insurer he led for 27 years, until Eliot Spitzer made up a bunch of nonsense about his cooking the books, which led to Greenberg’s ouster and the many disasters that have befallen AIG since, most notably a government bailout it didn’t need.
“Eliot Spitzer decided he wanted to take me down,” he said. “He was successful. Destroyed a company that had a $180 billion market cap. Now it’s what? A fraction of that. There’s been seven C.E.O.s since I left the company. Destroyed a great asset.”
Eliot Spitzer has himself been destroyed in the meantime. And Greenberg settled the lawsuit first brought by Spitzer last year, although he disputes his own words about the company’s financials having “inaccurately portrayed the account, and the financial condition and performance for AIG.” But Hank Greenberg isn’t finished. For while the man fought both Hitler and the North Koreans, he’s never seen something quite so insidious as the sword with which Spitzer brought him low: New York State’s Martin Act, a pre-Depression bit of anti-fraud legislation that allows the state to take action against rogue financiers even if they didn’t mean to go rogue.
“I care about my country and I care about the rule of law,” Mr. Greenberg, a veteran of World War II and the Korean War, said in a feisty interview this past week. “I fought two wars for my country. This is another war….”
“It’s outrageous,” Mr. Greenberg said of the intent issue. Asked if legislation broadly targeting all states was an appropriate remedy, he replied: “So is it better to have a law that violates every principle? Is that better? You can be tried for something without having to prove intent? Are we a third world country?”
Not yet, but if Greenberg is successful in this latest fight—to get a law pre-empting state securities legislation with more teeth than the federal versions through a Congress and White House that pay lip service but little else to the formerly sacrosanct-on-the-right concept of states’ rights—we will be soon.
Joseph P. Borg, the longtime director of the Alabama Securities Commission, said, “Any way you look at it, this bill is going to put investors at not only a disadvantage, but deep in harm’s way.”
“If I can’t prosecute, then what’s the deterrent?” added Mr. Borg, who is also the head of the North American Securities Administrators Association. “If I can’t bring civil action, then what’s the deterrent? None.”
Critics of the bill also said it represented the kind of rollback of states’ rights for which Republicans once criticized Democrats….
If it goes through, the bill’s text says it would “provide for exclusive federal jurisdiction over civil securities fraud actions.” It also says that “differing state regulatory requirements” create “inefficiencies,” raise costs and harm markets “without providing material investor protection benefits.”