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Member, Beacon International Group, Ltd.
NEW YORK (Bloomberg)—American International Group Inc. Chief Risk Officer Robert Lewis is stepping down after saying that the company underestimated the risk of bets tied to subprime mortgages.
“We were wrong about how bad things could get,” Mr. Lewis told the Financial Crisis Inquiry Commission in June. “What ended up happening was so extreme that it was beyond anything we had planned for.”
AIG CEO Robert Benmosche is overhauling management at the insurer, which was bailed out in 2008 by taxpayers and posted the biggest quarterly loss in U.S. corporate history. AIG in February hired Peter Hancock to oversee finance and risk. Mr. Hancock had spent about 20 years at a predecessor to JPMorgan Chase & Co.
Mr. Benmosche said in a memo to staff today that Mr. Lewis will remain with AIG for “a period of time to ensure a smooth transition.”
Mr. Lewis joined New York-based AIG in 1993 and was named chief risk officer in 2004, according to the memo. He told the FCIC that responsibility for liquidity-risk management fell to others at the company.
Mr. Lewis said he didn’t know that derivatives backing mortgage-linked securities included collateral-call provisions until after Goldman Sachs Group Inc. made its first demand in July 2007, according to the FCIC documents. When asked if the provisions caused consternation within AIG, Mr. Lewis said, “I would say that’s an understatement.”
“I only became aware of the collateral calls completely in the latter part of 2007,” Mr. Lewis said in the FCIC hearing.
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