Next crisis will be a 'bad bellyache': AIG chief

If the government hadn't saved the financial industry from collapse, the country would have suffered a depression worse than the 1930s, Robert Benmosche told CNBC.

By MSN Money Partner Sep 12, 2013 2:15PM

CNBCAIG CEO Robert Benmosche on March 19, 2013 (© Richard Drew/AP Photo)By Matthew J. Belvedere

 

If the federal government hadn't intervened in 2008 to prevent the financial industry from collapse, the country would have suffered a depression worse than the 1930s, American International Group (AIG) CEO Robert Benmosche told CNBC on Thursday, nearly five years since the fall of Lehman Brothers and the bailout of AIG.

 

Benmosche, a former MetLife (MET) CEO, came out of retirement in 2009 -- tasked with bringing AIG back from the dead, after the $182 billion taxpayer buyout of the insurance giant.

 

"Had we not acted, I believe the financial system as we know it today would not be here today," Benmosche said in a "Squawk Box" interview.

 

Earlier this year, AIG paid back the final installment of the 2008 bailout. All told, the Treasury said it made money on the investment to the tune of $23 billion.

 

Five years later, Benmosche said he believes that at some point there will be another financial crisis. "There's always a possibility that there will be a 'whale.' On the other hand, we've got to make sure the 'whales' don't sink the financial system."

 

He said he believes the Federal Reserve's stress tests on financial institutions are an important tool in preventing that from happening. "The way risk assets are calculated … there's very little chance that you'll sink the financial system. But you can cause a pretty bad bellyache for some of the big financial companies."

 

"If you go through most of the assets, most of the liabilities that sit in these financial institutions, I'm pretty sure we're getting our arms around it," he added.

 

"I always fear what I don't know," he continued, "[so] leave a little flexibility for the people who are empowered by the public to run our governments to make sure they have enough latitude to fix" any future crises.

 

Benmosche argued that the Dodd Frank Wall Street reform law -- the government's answer to the 2008 crisis -- is "basically precluding that." He added he worries about the notion that "'the policy is good enough, and smart enough; that human beings don't have to use their noodle.'"

 

As for who should be the next Fed chairman, Benmosche did not say whether he's backing Janet Yellen, central bank vice chair, or Larry Summers, who most recently advised President Barack Obama on economic matters.

 

Whoever gets the job needs to "use common sense and judgment," Benmosche explained, but added he worries about the pressure on Summers for the role he played as Treasury secretary in the 1990's deregulation of the financial industry.

 

More from CNBC

Tags: AIGMET
1Comment
Sep 12, 2013 6:23PM
avatar
We need to start eating these idiots or at least feeding them to the dogs!!!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
266
266 rated 2
452
452 rated 3
702
702 rated 4
671
671 rated 5
604
604 rated 6
640
640 rated 7
495
495 rated 8
267
267 rated 9
158
158 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ABBVABBVIE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
LUVSOUTHWEST AIRLINES CO.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.