In his first Capitol Hill appearance since the government bailed out AIG last year, the former CEO said that “the combination of short-term-oriented managers and advisors hired merely to sell assets has demonstrably failed.”

Greenberg then offered his recommendations to rebuild what once had been one of the world’s most profitable insurance organizations.

“AIG can recover,” Greenberg told the House Oversight and Government Reform Committee. But that recovery, intended to get AIG back on its feet and “become a taxpayer again,” is only possible with a new approach and a new management team, he said.

Rather than pursue the liquidation approach in which AIG is trying to sell off corporate units to repay tens of billions of dollars used to bail out the company, Greenberg suggested AIG should keep all core insurance properties that provide the income he said is necessary to repay the government.

Additionally, the government should wall off AIG Financial Products Corp., the unit that provided the credit default swap products that led to AIG’s near-collapse, and have a government-controlled entity run off the business, he said.

Greenberg also said government ownership of AIG—now just less than 80 percent—should be reduced to 15 percent and that the interest rate AIG pays on the money, which was 14 percent initially, should be reduced to 5 percent.

Such steps, he said, would better ensure that AIG survives.

“The way to do this is to abandon the liquidation approach and focus instead on rebuilding AIG so that it is better positioned to pay back the taxpayer,” he said.

Finally, Greenberg testified, a new AIG board and management team need to be installed.

Greenberg, who was forced out in 2005 after 38 years at AIG’s helm, said during nearly four hours of testimony that he was not responsible for the company’s downfall.

Asked by panel member Rep. Elijah Cummings, D-Maryland, if he felt any responsibility for AIG’s problems, Greenberg said, “I don’t.” He said that when he left, the company was healthy.

As for the credit default swap business that started on his watch, Greenberg said the unit that developed the business was highly profitable and contributed $5 billion to AIG’s pretax income from 1987 to 2004, Greenberg’s last full year.

Greenberg said the problems developed after he left.

“They got greedy,” writing more than they should have.

He also said the company failed to hedge the risks on the lower-quality business.

“It was a different book of business,” Greenberg said of AIG activities after his departure.

AIG, however, disagreed with that assessment.

“It is sad that Greenberg continues to criticize and blame others, especially those who are working every day to correct both the accounting and legal problems he left behind as well as his ill-fated decision to lead an insurance company into the credit default swap business, which he failed to manage responsibly,” AIG said in a statement.

AIG also said Greenberg’s assertion that he would have hedged the entire credit default swap business after ratings downgrades in 2005 “is implausible” and that “under his tenure none of these trades were hedged.”

Greenberg said selling off AIG assets is a doomed strategy because in a depressed economy buyers won’t pay market-value prices.

And, Greenberg said, it is destructive to morale when employees know the units in which they work will be sold.

In hindsight, Greenberg said, allowing AIG to file for bankruptcy reorganization may have been a better approach than the government bailout. A Chapter 11 filing would have caused a “ripple,” but would not have been “catastrophic,” he said.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.