Maurice "Hank" Greenberg, the former CEO of AIG, told Congress today that if the struggling insurance giant had simply been allowed to declare bankruptcy taxpayers would have been spared spending $180 billion to bail out the company.
And a bankruptcy by AIG would not have created economic havoc, Greenberg told a House Oversight Committee.
"It would have been a ripple, but it wouldn't have been catastrophic," he said.
The U.S. government bailed out AIG out of fear that a collapse of the huge company, which had extensive links throughout the U.S. economy and the world economy, would trigger an economic calamity.
Asked by Rep. Darrell Issa, R-Calif., if bankruptcy could have saved "tens or hundreds of billions of dollars" of government money, Greenberg replied, "That is correct."
"Everybody would have been better off, in my judgment, if they had declared Chapter 11," he said.
Greenberg, who led AIG for nearly four decades before he was forced out in 2005, came to Capitol Hill today to testify about the federal government's efforts to prevent the company he helped build from collapsing under a mountain of bad debt.
He said the federal bailout of the insurance giant has "failed" and Americans cannot expect to recoup the $180 billion the government has poured into the company.
"I share your concern, and the concerns of the American people, that the terms of the AIG bailout has tremendous burdens on taxpayers," Greenberg told lawmakers. "All plans so far advanced by the U.S. government to date have failed and the current plan, in my opinion, will not succeed. Major mistakes have been made."
He said that dismantling parts of AIG at "fire-sale prices will bring taxpayers... only pennies on the dollar for their investment in AIG."
Rather than proceeding with the government's current plan to wind down AIG," Greenberg proposed that the company should be rebuilt so that American taxpayers, who now own 80 percent of AIG, can eventually get repaid.
"AIG's history demonstrates that its business can be highly successful," he said. "If properly managed and managed properly, AIG is the only way to ensure that the American taxpayer will be repaid."
"The primary objective," Greenberg suggested, "should be to create conditions that allow AIG to repay the taxpayer in full and rebuilding AIG is the best way of doing that."
"AIG's business model did not fail - its management did," he said.
As he has done in the past, Greenberg today refused to accept any responsibility for the present situation, despite critics, including AIG's current management, pointing the finger of blame squarely at him for AIGFP, the unit of AIG that is blamed for accumulating the mountain of debt that brought the company to its knees.
A source close to AIG told ABC News last month that Greenberg was to blame for forming AIGFP in the first place, which "put the whole company and the whole economy at risk."
"When I left the company, it was a healthy company," Greenberg argued today. Greenberg pointed out that AIGFP had functioned well under his watch, but that his successors failed to pay sufficient attention to it, enabling the unit to engage in poor risk-management that eventually proved fatal.
"They got greedy," he said.
But lawmakers on both sides of the aisle were far from convinced that Greenberg was an innocent man.