Former Governor and Attorney General of New York, Eliot Spitzer--also, infamously, Client #9--now wishes to further bedevil the citizens;
"I love public service," Spitzer said in an interview. "This is a great job that has untapped potential, just as I saw the attorney general's office and said we could do more. I think more can be done as city comptroller."
He said he would focus on public policy discussions, the city budget and corporate governance, much as he did as state attorney general for two terms before he was elected governor in 2006. He wrote a book on improving the governance of corporations, which is due out in a week.Anyone remember the financial crisis of September 2008? One of the reasons for that was the liquidity crisis of insurance firm AIG. A crisis that simply would not have happened, but for the interventions of one Eliot Spitzer. Who, as NY Attorney General in February 2005, used his political muscle to oust the founder of AIG--then one of the world's soundest financial services firms--Maurice (Hank) Greenberg from his position as CEO. That action transformed AIG, and especially its Financial Products arm from a AAA rated credit risk to one seen as much riskier by its counter parties in the marketplace.
Here's a Fortune story on Greenberg in 1998;
Greenberg doesn't suffer smart people gladly if they happen to challenge something he holds dear--like the proper operation of his company. A case in point concerns Howard Sosin, who came to AIG in 1987 from Drexel, bringing with him a sophisticated financial-products operation that sold derivatives and the like and that became the nucleus of AIG's push into financial services. By 1992, Sosin's operation, called AIG Financial Products, was delivering around $172 million in pretax profits.
The trouble, though, was that Sosin wanted to run things in an all-out way that accelerated the recognition of profits (of which Sosin got a rich cut) and that also created more risk than Greenberg, a financial conservative, could abide.Note that, 'more risk than Greenberg...could abide'. Continuing with the Fortune profile;
A still deeper problem, to get right down to it, was that Sosin and Greenberg were both control freaks, and that was one too many. So in early 1993, Greenberg announced that Sosin would leave because of "a difference in opinion." AIG also took special charges that year that sliced off some of the profits Sosin had been reporting. Greenberg meanwhile put in new management and settled back to running the operation his way, which seems to be clicking: Last year Financial Products had pretax profits of $241 million.Iow, Greenberg's judgment, and lower tolerance for risk, worked out well for AIG (as well as for taxpayers who weren't in any jeopardy of having to bail out AIG because it created an international financial crisis).
Fortune portrays Greenberg as more than conscientious;
Says a Wall Streeter who has long known Greenberg: "There is not a stone that drops in that company that he does not hear."
Greenberg, for example, is a fanatic about AIG's internal auditing, conducted by 100 people who roam the company looking for wrongdoing. Anything they spot is reported directly, in writing, to Greenberg and a few other executives, including CFO Howard Smith.Enough said. Eliot Spitzer, in 2005, ambitious to move from NY state AG to Governor decided to leave no stone unturned to change the way AIG did business--including threatening AIG's accounting firm, Price Waterhouse Cooper not to certify AIG's financial reports for accuracy. The accounting firm, under Spitzer's pressure, folded, and repudiated its audit judgment of AIG. Spitzer then called a news conference to brag that he'd just exposed fraud, without even having conducted an investigation.
Not surprisingly the effect on AIG's stock price was hugely negative. Eventually, Greenberg resigned as CEO, and new 'corporate governance' procedures were instituted at AIG which weakened the power of the CEO and increased the power of outside directors. Power was divided, and management less effective as a result. Which allowed the head of AIG-FP, Joe Cassano, to acquire more risky assets--credit default swaps on pools of mortgage backed securities--and not properly hedge that risk.
By June of 2007, Cassano had quadrupled his holdings of sub-prime related securities. And, since AIG's credit rating was no longer AAA, he had to pledge collateral against them to his counterparties. Something Mo Greenberg had refused to allow when he was in charge of AIG. That situation was disastrous in September of 2008 when the value of that collateral plunged and AIG didn't have liquidity to meet 'collateral calls'.
Considering the fallout from Spitzer's handiwork back then, it's more than a little scary that he wants another job with 'untapped potential'.