Maurice “Hank” Greenberg, the former chief executive officer of American International Group Inc. (AIG:US), said it is “outrageous” that lawmakers demanded JPMorgan Chase & Co. (JPM:US) CEO Jamie Dimon testify about trading losses.
“Many companies have transactions that go bad,” Greenberg said today on “In the Loop With Betty Liu” on Bloomberg Television. “Everybody’s not paraded down to Washington to testify.”
Dimon told the Senate Banking Committee last month that he was too complacent (JPM:US) overseeing bets with credit derivatives at the bank’s chief investment office in London and that trades intended as hedges “changed into something I cannot publicly defend.” He said the bank has the financial strength to withstand the losses, which were at least $2 billion.
Senator Sherrod Brown, an Ohio Democrat, was among lawmakers who criticized the New York-based bank for taking too much risk.
“I don’t want to see consumer lenders in Columbus losing their jobs because cowboys in London make too many risky bets,” Brown said last month, referring to 19,000 JPMorgan employees (JPM:US) in his state.
“He handled it OK,” Greenberg said of Dimon, 56. “It was really outrageous to have the CEO come down and testify before Congress because of a transaction that didn’t work out well.”
Joe Evangelisti, a bank spokesman, declined to comment. A spokeswoman for the lender said in May, when Dimon agreed to testify, that the bank will be open and transparent with regulators and Congress.
Lawmakers have been pushing firms to account for losses after government rescues amid the 2008 financial crisis. Dimon has repaid U.S. funds while New York-based AIG, once the world’s largest insurer, is majority-owned (AIG:US) by the U.S.
Greenberg joins Goldman Sachs Group Inc. CEO Lloyd C. Blankfein in cautioning against a backlash against occasional losses by financial firms.
“If you put too much penalty on risk judgment, what kind of world are you going to have?” Blankfein, 57, said last month in Chicago.
Greenberg, 87, was forced to retire from AIG in 2005 after 38 years running the insurer. He’s now chairman and CEO of C.V. Starr & Co., an investment and insurance company.
Greenberg was called to testify about losses (AIG:US) at AIG that led to a 2008 government rescue that swelled to $182.3 billion. He missed the hearing that year because of an illness and submitted prepared testimony in which he blamed successors for AIG’s downfall.
“When I left AIG, the company operated in 130 countries and employed approximately 92,000 people,” Greenberg said in a written statement to the House Committee on Oversight and Government Reform in Washington. “The company we built up over almost four decades has been virtually destroyed.”
Greenberg said in today’s interview that occasional losses are common in banking. Still, financial firms shouldn’t make risky bets with deposits, he said.
“I don’t think you ought to use depositors’ money to do transactions that may have risk,” Greenberg said. “You can do that by having a separate subsidiary that’s capitalized by itself.”
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