Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide

Written by Roddy Boyd

Narrated by Joe Barrett

No shortage of material has been written on the financial crisis. From the collapse of Bear Stearns to Lehman and more, the subject has been well covered.  However, one story the central story has largely remained uncovered:  that of AIG, the behemoth at the center of the storm.  Bear disappeared and the world survived, Lehman collapsed yet the markets saw another day, a multitude of banks have folded, but the world has kept spinning. What everyone from AIG executives to government and elected officials knew was that if AIG failed, if the government didnt step in, that the entire system would collapse.  But few understand why this was, how it could have happened, and what really went on inside AIG and in the offices of the NY Fed and US Treasury. Fatal Risk is the story of how AIG was built almost too perfectly by the infamous Hank Greenberg who understood risk like no other. But when Greenbergs disdain of regulators led to a run in with Eliot Spitzer and his ouster, it all started to come undone, except that it couldnt be unraveled. Fatal Risk is the story of AIG, what it is, how it was so brilliantly created, but how once the mastermind was no longer running the show, it choked on risk, and how it almost brought the entire system down with it. From the most colorful and mercurial Hank Greenberg, to the B-actors he surrounded himself with, investigative reporter Roddy Boyd takes readers inside the weird world that was and is AIG.

• Language: English
• Publisher: Ascent Audio
• Release date: Jul 20, 2020
• ISBN: 9781663707512

Reviews for Fatal Risk

[keyareuh · Rating: 2 out of 5 stars]

I have to admit that I'm only 75% done with the book. However, I can say that I'm a little disappointed by it. I thought a reporter would be a good author and the writing is clunky and not objective (in my opinion). I will definitely finish the book, and I have learned a bit, but I just don't love it.And now I've finished it, but I'm leaving what I previously wrote as I still agree with it. I'm glad I read it but I might go look for other books on the financial crisis of 2008 to see if there is something I like better.

[rivkat_2 · Rating: 3 out of 5 stars]

Hard to know what to make of this book, which presents Goldman Sachs as a hero telling truth to the market and Eliot Spitzer as a villain, with Hank Greenberg as his victim. Dowd doesn’t explain much about Gen Re, the transaction that led to Greenberg’s ouster from control of the incredibly successful insurance company he’d built, but even Dowd has to admit that it was an out-and-out fraud designed to fool investors and regulators about the profitability of AIG’s trading partner, and that anyone apprised of its details would have known that. Dowd presents evidence both ways, but clearly thinks that Greenberg didn’t really know the facts of the transaction, despite the fact that the reason to laud Greenberg is that the man obsessively monitored risk and insisted on knowing every aspect of AIG’s business. The problem, and the real cautionary tale, is that Hank Greenberg’s presence was used as a substitute for actual accounting risk control. Can you call a man a success when he builds a company whose assets and liabilities are greater than those of many countries and that, with him gone, cannot accurately tell you what’s on its balance sheet? I think that question answers itself.Dowd’s condemnation of Spitzer suggests that outright fraud revealing, at the absolute minimum, an absence of a corporate structure that could detect and prevent such frauds, should have been written off as inconsequential because AIG was too big to punish. He also argues that Spitzer became megalomaniacal in treating big banks like criminal enterprises, except that they were criminal enterprises that succeeded in looting the economy and are still going. There’s plenty of blame to go around, and Dowd gestures at that in the end, though he still maintains that Goldman was just exercising good business sense when it demanded to be paid par (face value) for its now-nearly-worthless holdings. He suggests that the government had few choices but to pay that rate (even as he points out that it would have been possible for AIG to refuse Goldman’s collateral calls and litigate it out—there’s an adage, which he repeats, that there’s a courtroom on every corner in New York), but I’m not nearly as sure and I just don’t trust his judgment by that point. However, Dowd’s more general conclusion is easy to agree with: that repealing Glass-Steagall, which separated commercial and investment banks and thus prevented the kind of disastrous overleveraging we saw in the runup to the crisis, was an enormous and foundational mistake.Also, and this is just a pet peeve, where was the editor? There were three misused homonyms, each of which is plausible but wrong (took the reigns, said his peace, and into the breech).