The Spitzer After-Effect, II

Eliot Spitzer may be gone from the governorship of New York and even longer gone from the office of attorney general of this state, but the ill effects of his efforts to dictate the management and business practices of New York's companies are reverberating to this day. The latest illumination of the problem is a letter filed by the man who built AIG into a modern multinational insurance giant, Maurice Greenberg. In a letter filed yesterday with the Securities and Exchange Commission, Mr. Greenberg, ousted from the leadership of his own company after a public campaign against him by Mr. Spitzer, recounts the record of the company under the Spitzer-installed management.

"AIG last week announced a net loss for the first quarter of 2008 of $7.81 billion," the letter says. "It is the worst performance in AIG's approximately 40-year history and follows almost equally poor results from last quarter, which was the worst quarter in the company's history before this quarter. Over the last twelve months shareholders of AIG have lost $80 billion in the aggregate."

Mr. Greenberg said that in the more than three years since he left the company, "AIG has added 24,000 employees, many in cost center functions. This is the equivalent of two Army divisions." Mr. Greenberg controls between 10% and 12% of AIG shares.

AIG is just the latest company to flounder under management installed after Spitzer ousted successful leaders. Marsh & McLennan Companies, whence Mr. Spitzer ousted Maurice Greenberg's son Jeffrey, and Citigroup, where Mr. Spitzer's role was more subtle yet nonetheless significant in ousting Sanford Weill, have also fared poorly. Let it be a humbling lesson for those regulators tempted to move against corporate executives they think are serving shareholders poorly. The new management installed by the regulators may be worse than what came before.