Too Big to Fail [86]
“Zarb thinks it’s all or nothing, too,” Willumstad said, referring to Frank Zarb, AIG’s former chairman. “He doesn’t want to have three CEOs in three years with a fourth one coming in.”
“You know, if you do things well, it’s still going to take you two years at a minimum,” Dimon said about the prospects of turning things around, leaning forward and punching the air to underscore his points. “The question is, do you want to get back in the saddle or not? If you are going back in the saddle, remember how hard the saddle is.”
Willumstad nodded in agreement. But he had one other concern. “I don’t like both the public appearance of it and that it looks like I’m going to throw Martin out and put myself in,” he said, but Dimon assured him that that was not a serious issue.
The board wanted Willumstad to take the job; his wife, Carol, thought he should—she had always believed that he had been robbed of the CEO job at Citi—and now Dimon was adding his vote.
The next day Willumstad took a black Town Car to AIG’s offices at 70 Pine Street. Upon taking a seat in Martin Sullivan’s office, he delivered his message without any equivocation: “Listen, Martin, the board is going to meet on Sunday, and whether or not you continue in this job is the topic of discussion.”
Sullivan merely sighed and said, “The board doesn’t fully appreciate how difficult this market is. When I took over, I had to clean up the mess with our regulators, and I can lead us out of these troubles.”
“Yes, Martin,” Willumstad acknowledged, “but you have to look at what has happened over the last few months. The feeling among directors is that someone has to be accountable…. Look, there are three possible outcomes of the board meeting. I could be coming back to you and saying that the board fully supports you, or the board thinks you should go. The other possibility is that the board says, ‘You have to do the following things in an X period of time or else you’re out.’”
Sullivan looked down at the floor. “And what do you think the likely outcome will be?”
“There’s a strong sentiment to make a change, but who knows?” Willumstad replied with a shrug. “You put twelve people in a room, and anything could happen.”
On Sunday, June 15, the board of AIG met in the office of Richard Beattie, the chairman of the board’s outside law firm, Simpson Thacher & Bartlett. Sullivan was on the agenda, but he had chosen not to attend. After a brief discussion, the board decided to remove Sullivan and install Willumstad in his place.
The company over which Willumstad had now been assigned stewardship was one of the most peculiar success stories in American business. American International Group began as American Asiatic Underwriters in a small office in Shanghai in 1919. Nearly half a century later, it had operations throughout Asia, Europe, the Middle East, and the Americas, but with its modest market value of $300 million and about $1 billion worth of insurance policies, the privately owned firm was hardly a juggernaut.
By 2008, however, the word “modest” was seldom used in connection with AIG. In only a few decades it had grown into one of the world’s largest financial companies, with a market value of just under $80 billion (even after a steep slide in its share price earlier that year) and more than $1 trillion worth of assets on its books. That phenomenal expansion was primarily the result of the cunning and drive of one man: Maurice Raymond Greenberg, known to friends as “Hank,” after the Detroit Tigers slugger Hank Greenberg, and referred to within the company simply as “MRG.”
Greenberg had had a hardscrabble upbringing worthy of a Dickens hero. His father, Jacob Greenberg, who drove a cab and owned a candy store on the Lowest East Side of Manhattan, died during the Great Depression when Hank was only seven years old. After his mother married her second husband, a dairy farmer, the family moved to upstate New York, where Hank would wake before dawn most mornings to help milk the cows.