Greenberg v. AIG: the evidence and the truth

The difference between journalists and lawyers?  Journalists, at least as they practice their craft these days in this country, practice a pretended objectivity by giving voice to both sides of a dispute.  I presume the purpose is to leave the reader to be the judge.  It’s a way of going about thet job that gives the impression of being as fair as it is possible to be.  Fox News has grounded its entire image  in precisely this perception of what is most fair: “We report, you decide.”

I’ve bemoaned before the absence of critical thinking that goes into this style of reporting.  The New York Times is at it again today, this time on a subject far more important than whether a hot artist’s most valuable products infringe the copyrights of other creators — how AIG got our country into the financial mess it’s in and whether we ought to trust the people who brought us here to lead us out.  Hank Greenberg, the long-time head of AIG who was deposed in 2005, testified yesterday to Congress and claimed that the Obama administration should have let AIG go bankrupt, that the administration’s policies have deprived AIG of its most valuable assets by driving off the people who led AIG into its catastrophic state, and that Mr. Greenberg’s policies — which included the creation of the credit default swaps that “insured” the mortgage backed securities that were doomed to failure — had nothing to do with the eventual failure of AIG.  He might not have provided reserves to allow AIG to afford the liabilities it had assumed when it sold the credit default swaps (thereby earning itself enormous amounts of money, profits that of course contributed to the fortunes made by Mr. Greenberg and the other geniuses who our government has driven away), but, he says, he would have set aside reserves to meet those liabilities (thus averting the necessity of the bailout) had he been allowed to stick around.

The story does give the other side of the story, quoting a spokesperson for the current management of AIG contradicting Mr. Greenberg and asserting flat out that he lacks any credibility:

“Hank Greenberg continues to deny his role in allowing [AIG's Financial Products Division] to write the multisector credit-default swaps which sowed the seeds for AIG’s troubles,” the company said, referring to the financial products unit. It went on to denounce Mr. Greenberg as evading questions and lacking credibility as a business strategist.

“He refuses to acknowledge that he approved entry into the credit-default swap business, approved more than $40 billion of swaps written on C.D.O.’s containing subprime loans, and didn’t hedge or put up reserves against them,” the company said. Collateralized debt obligations are securities made from pools of loans and other forms of debt.

“We don’t understand how he can be viewed as having any credibility on any AIG issue.”

My problem with this type of journalism is that it doesn’t make judgments that can be made.  It often may be difficult to tell right from wrong with certainty, but there are often clear judgments to be made about which position is better and which worse.  Mr. Greenberg’s self-interest in these matters, his lifetime of self-promotion in the interests of building an immense personal fortune, and his rank hypocrisy are legendary.  A journalist is capable of giving both sides of an argument and of understanding context and making judgments.  To fail to do so leaves the reading public to do that work themselves, something that people simply don’t have the time to do.

Lawyers, on the other hand, do contend always with adversaries setting forth evidence that seems to contradict the evidence they are presenting on behalf of their own clients.  But setting forth the evidence is only part of a lawyer’s job.  The lawyer also structures that evidence into arguments on behalf of his client’s position, explaining specifically how that evidence should be viewed.  Then decision makers (juries, judges, arbitrators, etc.) decide.  The lawyer doesn’t rely on the decision-maker to figure out how to explain the evidence.  The lawyer gives the decision-maker the means of understanding it.

I don’t know why journalists don’t do so more often.

War is Peace, or They can sue, but you can’t.

There is wisdom and responsible citizenship, and then there is mindless use of law to advance whatever selfish interests one has when one has them.  May my students know the difference, and may they not serve clients who want the latter at the cost of the former.

In November 2006,  the Committee on Capital Markets Regulation issued a report arguing for cutting back on regulation of financial markets, for limitations on private lawsuits and on lawsuits by state attorneys general, and for increased restrictions on the ability of the Securities and Exchange Commission to issue new rules. The Committee on Capital Markets Regulation was a private group, but it had prominence.   Its co-chairs were R. Glenn Hubbard, the dean of the Columbia University Graduate School of Business, and John L. Thornton, the chairman of the Brookings Institution, its formation was endorsed by then-Treasury Secretary Henry M. Paulson Jr., and a significant part of its funding came from the Starr Foundation, started by Maurice R. Greenberg, who had in 2006 recently been deposed as Chairman of AIG.

Greenberg and AIG were notoroius for their hostility to lawsuits.  It figures — AIG is (was?) an insurance company, and liabilities are what insurance companies are supposed to pay for.  As the founder of one law firm I worked for, Gene Anderson, always says, “Insurance companies are in the business of collecting premiums and denying claims.”

Now, though, Greenberg no longer heads AIG and AIG showed itself incapable of paying for the liabilities it had collected premiums to insure.  So their minds seem to have changed.  Greenberg has become a lawsuit enthusiast, most recently suing AIG for for securities fraud based on alleged “‘material misrepresentations and omissions’” that  caused him to acquire New York-based AIG shares in his deferred compensation profit-participation plan at an ‘artificially inflated price.’”

And I just read that AIG commenced a lawsuit last month against the federal government seeking a return of $306 million in taxes it claims it should not have paid.  The claims include taxes paid in connection with AIG’s financial products unit (“the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall”), and “AIG offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg and the Starr International Company.”

As the New York Times puts it:

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

And if you think corporations should be liable to individuals for damages their products cause, that taxes should be raised on the people who earn more than 95% of our citizens, and that we should tax the inheritances of heirs who have done nothing to earn that money, you’re accused of engaging in “class warfare”?  I’ve got news for you: they struck first.