Robert Benmosche, the combative new chief executive of American International Group (AIG, news, msgs), hasn’t wasted much time ruffling the new Washington-Wall Street establishment, but his most audacious move wasn’t brushing off taxpayers — it was thumbing his nose at common sense. 
Search for more on Hank Greenberg
How else can you describe Benmosche’s decision to bring back Hank Greenberg, the founder, architect and builder of AIG? He’s also the man who smeared the company in a nasty accounting scandal and who was ultimately responsible for the insurer being dragged into the industry’s bid-rigging scheme of a few years ago.
Benmosche is unrepentant in his decision to reach out to the shamed Greenberg. In announcing that he was reaching out to Greenberg, the new chief executive called his predecessor “the senior statesman of the industry.”
Benmosche clearly has “Scarface” protagonist Tony Montana’s knack for announcements:
“Say hello to my little friend.”
Really though, what’s Benmosche doing except acknowledging that hubris never goes out of style on Wall Street.
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It’s not just Greenberg. Henry Blodget, the disgraced Merrill Lynch research analyst who trumped up Internet companies to his paying clients and dissed them behind their backs, has found new life as a financial journalist.
Blodget recently interviewed another Wall Street hypocrite — this one a regulator — Eliot Spitzer. The former governor and crusading New York State attorney general, who was caught paying for high-priced call girls, has re-entered public life. He gives interviews. He’s got a teaching gig. And state politicians are openly taking about the “Luv Gov” making another run for office.
But the chutzpah of Wall Street scourges doesn’t end there. Stephen Feinberg, whose hedge fund, Cerberus Capital Management, invested in such doomed companies as Chrysler and GMAC, is launching a new fund even as investors are scrambling to get out of his old funds. The kicker: Cerberus is asking for a three-year lockup, meaning that investors won’t be able to withdraw their funds for that period.
Feinberg is just getting started when you compare him with John Meriwether, the whiz kid trader who’s now in his third decade of being in the wrong place at the wrong time. First came a bond-trading scandal in 1991 at his Salomon Brothers unit. That was followed by his hedge-fund meltdown in 1998 that started the bailout craze, Long-Term Capital Management.
Meriwether is now reportedly discussing starting a new trading partnership — this after his post-LTCM firm began unwinding its portfolio and returning money to investors this summer following what was described as “steep losses.”
Don’t forget Frank Quattrone, who was accused and unsuccessfully prosecuted for favoring clients in his wildly successful Internet public offerings a few years ago. He’s now a strategic adviser in Silicon Valley.
Never admit they’re wrong
All of these characters share one thing in common. It’s one thing that separates them from those who flame out on Wall Street never to return. No matter how much evidence of failure is gathered against them, the Blodgets, the Spitzers and the Meriwethers never really admit they were wrong. They walk around as if nothing happened. They ride the notoriety of their names to new or refurbished careers.
It won’t be long before the recent crop of shamed Wall Street executives re-emerge. Who knows when Stanley O’Neal, the former head of Merrill, or Richard Fuld, the disgraced former chief executive of Lehman Brothers, will reappear on a talk show or in the financial pages talking about the new firm they’re starting or the company that’s hired them on as a consultant.
Greenberg, who has never wavered in his defense of how he ran AIG and how his successors crippled the company, is back. It doesn’t matter that earlier in the decade AIG was forced to restate earnings that lowered profits by $4 billion and had to pay a $1.64 billion settlement. It was under Greenberg that AIG got into the business of insuring credit default swaps — the business that ruined the company.
Can Hammerin’ Hank help? Does he have any knowledge? Probably, if only in the same way Willie Sutton knows about bank security, Phillip Garrido knows about kidnapping and Bernie Madoff knows about audits.
Plus, he’s earned a shot. Greenberg has learned the rule about second lives on Wall Street: Never admit you screwed up the first one.
Let’s face it, Wall Street is really a culture that embraces its fallen, its malefactors, its miscreants and its failures as long as they hold their heads up and keep their swagger.
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