This NYT report is a fascinating story for more than one reason. Maurice Greenberg, the man who built AIG into the biggest insurance group in the world over the course of 40 years, lost most of his fortune when the company nearly collapsed last year and had to be saved by the government (Greenberg had already been ousted from AIG, in 2005 and claims not to have been responsible for the company's troubles). He is now building a competitor to his old business - some call it "AIG 2" - that is threatening to siphon off AIG's business and talent:
“To me, it’s just going to be a matter of time before the valuation of what he’s building is greater than the valuation of A.I.G.,” said Andrew J. Barile, an insurance consultant in Rancho Santa Fe, Calif.
Greenberg, says the Times, has just received a boost from the Obama administration's decision to cap the pay of executives at companies the government bailed out; he will now find it easier to compete for the people he wants to cherry-pick from AIG. All of this may mean, of course, that AIG's recovery will be delayed or stunted and thus that taxpayers are less likely to get their money back.
This is fascinating from a kind of economics textbook perspective, because it illustrates the tough choices that policymakers face when they intervene in the private sector. Obama, Geithner and co. will have calculated that the political and economic benefits of capping pay outweigh this kind of counter-effect, but it's by no means a sure thing (as those calling loudly for government action on bankers' pay often seem to think).
It's a demonstration of the relentless, protean logic of capitalism, and of the ethical paradoxes it throws up: do we admire Greenberg for his entrepreneurial zeal, or decry his activities as an assault on the public interest?
It's also just a compelling personal story. The man is eighty-four. And he wants to build another empire from scratch.
(Photo: Reuters)
I vote 'admire'. Not least because if it was me, I'd just lazily take my remaining money (I assume he didn't lose the whole lot?) and go and live in Monaco.
Posted by: ejoch | October 27, 2009 at 03:24 PM