NYT’s False Balance on AIG Ex-CEO Greenberg

Jay Rosen points me to a story on AIG in The New York Times this morning and asks if a “‘he said, she said’ story is the best the New York Times can do with (an) ex-AIG boss at this date.”

This one’s easy: No.

The Times’s story offers no analysis and forces readers—95 percent of whom know little or nothing about Greenberg’s tenure at AIG—to try to guess who’s right.

Refusing to accept any personal blame for his former company’s collapse, Mr. Greenberg insisted that A.I.G.’s problems stemmed from mismanagement after he left and that the Treasury and Federal Reserve had made things worse by trying to break the business up and sell it off in pieces…

Mr. Greenberg immediately found himself in a bitter long-distance fight with A.I.G.’s current, government-installed management. Even as he was testifying, A.I.G. accused him of playing a central role in A.I.G. Financial Products, the unit that caused the company’s collapse last year.

There’s no attempt to try to separate out who’s right here, even though everybody but Hank Greenberg knows he has major responsibility for driving AIG into the ground.

Here’s some stuff that helps explain why. I just culled it from the excellent Washington Post three-parter on AIG in December (if you haven’t read that yet, make sure you do):

He created the Financial Products division in 1987 with traders from soon-to-be disgraced Drexel Burnham Lambert, approved its entry into the credit-default swap market in 1998, empowered Joseph Cassano, oversaw FP when it set up “sham” companies that resulted in tens of millions in fines, was an unindicted co-conspirator in a huge fraud at AIG, oversaw the company’s credit downgrade from AAA, was in charge when half of the company’s $80 billion in CDS on subprime CDOs were written. Apparently, Cassano and FP stopped issuing CDS within months of Greenberg’s exit in 2005.

How much more evidence do you need to tell your readers that this guy has significant responsibility for the disaster that came to his company and the entire economy—to not let him spin away?

And it’s not like Greenberg had a stellar rep before his former company blew up.

There was the scandal that forced Greenberg out of AIG in 2005. The Gen Re convictions on charges to which he was an unindicted co-conspirator. He and three others settled with a Louisiana pension manager for $115 million in September after it sued him in 2002 for self-dealing.

Why cut him slack with a he said/she said?

Rosen asks another question via Twitter:

Have they just accepted a system where the columnists tell us what’s actually happening and the news is assumed to be off?

No, I don’t think so. There are plenty of regular news stories in the Times business section that are rich with analysis and cutting-through-the-BS. In Business Day a couple of days ago, for instance, there was this news story from Floyd Norris (who happens to be a columnist, as well) on the FASB accounting-rule changes:

The changes, proposed two weeks ago after a Congressional hearing in which Robert H. Herz, the chairman of the Financial Accounting Standards Board, was essentially ordered to change the rules or face Congressional action, are generally supported by banks, although some want the board to go even further.

But they have produced a strong reaction from some investors, with one investor group complaining that the changes would “effectively gut the transparent application of fair value measurement.” The group also says changes would delay the recovery of the banking system.

“Investors,” wrote Kurt N. Schacht, the managing director of the Centre for Financial Market Integrity of the CFA Institute, “will not be willing to commit capital to firms that hide the economic value of their assets and liabilities.”

Norris pretty well exposes the problems with this new rule by effectively weighting the value and truth of what each side is saying. He does something similar today.

I think you see more of those judgment calls when reporters have the space given to them on section-front stories. They’re less likely to do it on smaller inside news stories like this Greenberg one. I understand the instinct to just report the news, but readers deserve better context.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.