Good for the Money: A book review by Bob Morris

Posted on: May 3rd, 2016 by bobmorris

Good for the MoneyGood for the Money
Robert Benmosche
St. Martin’s Press (April 2016)

An embattled CEO’s perspectives on what a leader should do – and not do – during times of severe economic panic

I knew nothing about Bob Benmosche and little about American International Group (AIG) until I read this book, his memoir written with the assistance of Peter Marks and Valerie Hendy. The focus is on his leadership of the company as its CEO (2009-2014). He was appointed President & Chief Executive Officer by the US Department of Treasury and AIG Board of Directors to succeed Edward M. Liddy. He played a key role as AIG struggled to repay U.S. government supervised taxpayer aid of $182-billion. It eventually did and the full amount was $205-billion, including interest.

It is important to keep in mind that this is Benmosche’s account of what happened. Also, why. The opinions are his own, not only of issues and decisions but of key people and the extent to which each — according to him — aided or undermined his efforts. These were his three main objectives: Prune AIG of everyone and everything that was under-performing, demonstrate that AIG was “good for the money” to repay its debts, and re-establish and then sustain profitability. Unfortunately, he was diagnosed with lung cancer and after a lengthy struggle, died on February 15, 2015.

These are among the passages of greatest interest and value to me, also listed to suggest the scope of Marks and Hendy’s coverage:

o New York Military Academy and Bob Benmosche (Pages 50-53)
o Hot seat as the sweet spot for Bob Benmosche (74-89)
o News media (98-100, 135-136, 139-140, and 188-189)
o Abe Greenberg and history of AIG (106-107 and 109-113)
o AIG history prior to Bob Benmosche (106-123)
o AIG’s restructuring plan (124-140)
o AIG dysfunctional environment and Bob Benmosche (136-137)
o AIG financial products (141-162)
o Corporate jets (142-147 and 157-158)
o Golub’s resignation ultimatum (180-197)
o Bob Benmosche’s consideration of resignation (192-195)
o Recapitalization plan (224-225 and 228-230)
o AIG and consumer confidence (225-226, 228-229, and 237-239)
o AIG’s stick selling strategy (230-231 and (233-234)
o Death of Bob Benmosche (253-254)

Here are three perspectives on Benmoshe:

Jonathan Kandell
The New York Times (2/27/15)

Mr. Benmosche’s salvage operation began on a sunny afternoon in Croatia in July 2009. He was enjoying another day of retirement at his home on the outskirts of Dubrovnik, with the Adriatic Sea spread out before him and his vineyard in back, when he received a desperate phone call from New York. It was the executive search committee for A.I.G.’s board.

Once the largest insurance company in the world, A.I.G. became the worst casualty of the global financial crisis of 2008. It was labeled “the most hated company in America” after the bailout.

The search committee was calling Mr. Benmosche (pronounced ben-moh-SHAY), the former chairman and chief executive of another insurance giant, Metropolitan Life, to entreat him to come out of retirement and take the helm of A.I.G.

“My first response to them was, ‘You must think I’m crazy,’” Mr. Benmosche recalled in a 2012 interview. “But then I thought about it and said to myself, ‘You know, they’re right — the financial industry is in chaos, and I’ve got the skills.’ ”

* * *

Leslie Scism
The Wall Street Journal (2/27/15)

At the time, AIG’s future was far from secure, even with the massive federal aid that had been extended in 2008 during the depths of the financial crisis. The company had been on the verge of a bankruptcy filing, in large part due to sales of a risky, unregulated type of mortgage-bond insurance. The Federal Reserve and the U.S. Treasury had reluctantly rescued AIG, fearing its collapse would have caused widespread economic chaos. The aid reached $184.6 billion at its peak, with U.S. taxpayers at one point owning 92% of the company’s equity.

Mr. Benmosche took a stand against what he saw as unfair vilification by politicians of the vast majority of AIG employees who he said had nothing to do with the company’s problems. He hosted dozens of “town halls” at AIG locations in the U.S. and elsewhere that served as pep rallies for demoralized staffers. He spoke off the cuff and fielded extensive questions. He cracked jokes and used profanity.

In those early days, he publicly criticized politicians, threatened to quit over government pay constraints and spoke bluntly about what he thought were missteps by the government in seeking to move too fast to sell assets to repay the aid. He feared fire-sale prices for crown jewels in the then-sluggish economy.

* * *

Hugh Son and Zachary Tracer
Bloomberg (2/27/15)

Liddy’s relations with Congress and federal regulators were testy. He was twice grilled by lawmakers over bonuses paid during his tenure. Benmosche said he would leave working with Congress to Golub, the former CEO of American Express Inc., while he focused on operations and decided which units to keep.

Golub “is going to run interference for me in Washington because, I’ve got to tell you, I can’t be running the business here and dealing with all those crazies down in Washington,” Benmosche said on Aug. 11, 2009, adding, “actually, they’re not. They’re very nice, sophisticated people. Vote for them. Please. And give them your money.”

Benmosche also criticized then-New York Attorney General Andrew Cuomo on Aug. 11, 2009, over Cuomo’s handling of a bonus probe of the company, saying he “doesn’t deserve to be in government.” AIG issued an apology on Benmosche’s behalf and said that the executive was responding to workers’ concern about harassment amid the bonus furor.

* * *

In my opinion, these are among the key points:

1. Bob Benmosche was the right person to lead AIG as CEO when he did and how he did.
2. There were few (if any) gray cats in his alley. Those not for him were against him. Period.
3. Occasionally wrong but never in doubt, he was until he died the best Bob Benmosche he could be, for better or worse.

Let’s allow him the final words. “Learning without wisdom is like a mule walking down a hill with a stack of books on his back.” There is a great deal of value to be learned from Bob Benmosche and then shared with others.

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