Reverence for $$$
In a really terrible story, the New York Times calls Hank Greenberg a revered Wall Street titan.
Considering the complete lack of morality and realism on Wall Street, this characterization is no doubt accurate enough but for newspaper readers it calls for some context.
Greenberg was head of A much larger fraud then Bernie Madoff ever dreamed of running. It was called American Insurance Group and it was the world’s largest Insurance company. It also ran a bunch of other businesses — a giant combination that was a festival of fraud.
It also was one of the handful of American corporations that started 2008 with a AAA credit rating:entirely undeserved as is Greenberg’s venerated status on Wall Street.
Greenberg is a classic example of what RtO calls the Fireproof Hotel Syndrome: an incompetent and a fool who had a longish run because capitalism, despite its founding myth about how ruthless it is, in fact does not punish incompetence — at least not always and not immediately.
Let us recall what the AIG business actually consisted of just before the Bush crash in October 2008. There was a division called Financial Products which was insuring derivatives to the tune of trillions of dollars and had set aside $0.00 as a loss reserve. Let that sink in for a moment: Greenberg, the most respected insurance man in the country in September 2008, had a division that was exposing his company to hundreds of billions of dollars in losses and he set aside $0.00 as a loss reserve.
It might have been supportable if AIG had crashed over that — as it would have if the government had not given it $180 billion dollars to tide it over. What is not well understood is that AiG also had total control over the commercial paper market in the United States.
It was the realization by federal regulators that if AIG went down it would take down the commercial paper market the caused panic among the regulators and led to the bailouts.
Commercial paper is a sonkish sort of a subject. It is a huge market and the most liquid in the world, even more so than US Treasury securities. Corporations that need cash borrow overnight from corporations that have cash in hand because their incoming and outgoing are not perfectly synchronized
American businesses cannot operate for two days without a functioning market for commercial paper.
Greenberg was an incompetent as he demonstrated or was demonstrated for him in 2008, but his interview with the New York Times proves that he is a fool because he learned nothing.
So, sure, Wall Street revers him: he walked away from the wreck with a huge personal fortune. There’s nothing Wall Street reveres more.