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AIG executive visits MU to discuss financial crisis

Friday, October 23, 2009 | 12:01 a.m. CDT
David Herzog, left, the chief financial officer of American International Group, Inc., answers a question from Bruce Walker, dean of the Robert J. Trulaske College of Business, about how Herzog manages his time during a talk on Thursday in Bush Auditorium in Cornell Hall.

COLUMBIA — The line to get into Bush Auditorium snaked along the lobby of Cornell Hall. Excited chatter buzzed from the sea of business casual attire that packed the lecture hall as attendees awaited American International Group Inc. executive and MU alumnus David Herzog.

Herzog, chief financial officer and executive vice president of AIG, gave his "Perspective on the Financial Crisis." His presentation was broken down into three parts. The first part highlighted what he thought caused the financial crisis. The second part focused on what AIG is and how it was impacted by the crisis, and the third part included lessons that AIG learned.

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AIG received the largest government bailout in U.S. history last September. Financial leaders were concerned for the stability of the entire financial system after it was discovered that AIG’s Financial Products Division didn’t have enough money to pay for credit default swaps. AIG received $85 billion to prevent the company from going bankrupt, according to the Wall Street Journal and Reuters.

Herzog's presentation was sponsored by the Trulaske College of Business. The talk was a part of the school's Distinguished Alumni Lecture series.

Although limited, it was a unique opportunity for the public to have access to an executive so close to the financial turmoil that has affected the nation's economic health over the last year.

"Overall, it was an exciting opportunity to have someone of his stature here discussing the crisis," graduate accountancy student Joe Krienert said.

Katie Ehlers, also a graduate accountancy student, said that she enjoyed Herzog's speech.

While Krienert said it was an exciting opportunity, he hoped for more from Herzog. "I would have liked to have heard more about his role. We heard a lot about the company," Krienert said.

From an accounting perspective, some attendants wanted more details.

Krienert said he was hoping for more discussion about how AIG plans to repay the money it owes the government.

Other audience members found the presentation complex.

"The first part was somewhat complicated and difficult to understand," said David Mertz, a Master of Business Administration student. "Once he got to the question and answer portion, it was a lot more useful."

The question and answer portion of the presentation consisted of Business School Dean Bruce Walker coming to the podium to ask Herzog questions from students.

"We picked ones we thought would cover a variety of topics," Walker said.

Six student questions were asked. The questions focused on AIG's restructuring of the company's risk models and how Herzog has adapted his leadership because of the 80 percent stake the government has in AIG as part of the $85 billion bailout.

"My frame of reference for how I interact with government is first and foremost appreciation for what they've done," Herzog said. "They are 80 percent owner, and I treat them like 80 percent owner. I treat them like our principal creditor."

In a presentation, audience members usually have more access to the speaker. This didn't bother Mertz.

"I don't think it was unreasonable that the questions were pre-selected," Mertz said.

Walker agreed. "Herzog, in the CFO role, has to be pretty sensitive to the statements he is making," he said.

Herzog was selected to speak to the College of Business because he was so close to the financial crisis.

"Mr. Herzog, we thought, given his role at AIG, he could provide insights that few other people could," Walker said, "I was struck by how he was so committed to doing what is right by the tax payers and the 80 percent ownership of the government."

Walker added, "The last 13 months have been a tremendous test of (Herzog's) optimistic attitude."


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