AIG Ex-CEO Breaks Down the Final Days

Willumstad added further credence to the view that AIG's recently deflated stock run-up was based on nothing but air. The former top gun believes AIG's debts to the government are simply too massive to be pared back in any way that benefits shareholders. He also notes that Benmosche faces a huge challenge in retaining top talent to help trim AIG's operations and keep healthy businesses competitive. Because of compensation restrictions and political pressure, many of the insurer's most valuable assets are "walking out the door," Willumstad said.

Ironically, while Buffett couldn't swing the deal, the P&C division is one jewel of the core divisions AIG is holding onto. There aren't many more, said Willumstad. He doesn't predict AIG will be a viable entity apart from government support any time soon.

Uncle Sam has now extended more than $180 billion to keep the financial-services giant afloat, and Willumstad noted that AIG will have to be pared down significantly to pay back that massive debt.

"It owes the government more money than it has the ability to pay back," Willumstad asserted. "...What's likely to be left of AIG is a small portion of its former self."

Shares of AIG fell 4% to $43.15 in recent action.

-- Written by Lauren Tara LaCapra in New York

>To order reprints of this article, click here: Reprints