Hank You Very Much

These are historic times. The country and the world are learning the hard way how intertwined the insurance industry is with the global economy. A respected private insurer — American International Group — called too big to fail had to be rescued with an $85 billion loan from the U.S. government.

As the AIG crisis unfolded, two Hanks stepped forward.

Hank Greenberg is the ousted CEO and architect of giant AIG, 80 percent of which is now owned by taxpayers. As the situation for the insurer worsened, a not-so-modest Hank Greenberg called AIG a “national treasure” that had to be saved.

Is that “national treasure” as in its demise would leave a hole in the economy the size of the Grand Canyon or treasure as in riches buried by pirates?

Hank Greenberg was in charge at AIG when the firm first got involved in the insurance for credit default swaps that eventually came to threaten the successful insurance empire he built. Hank Greenberg, a veteran of World War II, has never shied away from risk but credit swaps turned out to be risks that eluded risk management expertise. Had Hank Greenberg still been in charge when they started going south, perhaps he could have done more than his successors proved capable of doing. The world will never know.

To the other Hank, Treasury Secretary Paulson, of Goldman Sachs and Wall Street fame, who proposed the $85 billion rescue loan, letting AIG fail was “unthinkable.”

Is that “unthinkable” as in the federal government or Congress didn’t think about regulating Wall Street or unthinkable that Americans would stop paying their mortgages?

Hank Paulson said AIG was unmasked to be a “hedge fund on top of insurance companies” — a holding company with little federal oversight and insurance entities “regulated by 50 different insurance regulators.”

Hank Paulson said that, of course, as if state regulation is a bad thing. Wall Street Hank was not thinking about the fact that state regulation is what actually protected AIG policyholders and the rest of AIG from ruin. What is also unthinkable is that advocates of federal regulation would use this crisis as evidence of the need for federal regulation of insurance and keep a straight face when doing so.

Hank Greenberg might be partly to blame for AIG’s woes but he might also have been in the best position to help. It seems egos, ignorance, even fallout from the Spitzer allegations contributed to an environment that kept the savvy and well-connected Hank Greenberg out of critical negotiations and cash-raising efforts in time to help AIG.

Hank Greenberg says AIG ignored his overtures and even Hank Paulson dismissed Hank Greenberg’s talk about how he could help save AIG. “A lot of people are saying a lot of things … and a lot of people want to rewrite history,” Hank Paulson said.

Hank Greenberg can’t rewrite AIG’s recent history but neither should his long history with AIG be ignored. He probably more than anyone can help write AIG’s future.

Hank Paulson has his hands full rebuilding Wall Street and his expertise is needed. But when it comes to rebuilding an insurance company, we’ll take our chances with the other Hank. Who could be more motivated or qualified to rebuild AIG than Hank Greenberg?