I recently finished reading Kate Jennings’ novel Moral Hazard and pinged on her implying as a commonplace that New York’s investment banks were chock full of retired military types and spooks.

If I’m reading between the lines of these two paragraphs from Part I, then there is a certain expectation that sharing your business and personal details with AIG since WW II (and by extension with its US-flagged competitors) was equivalent to sending them to the American intelligence community.

AIG’s roots went back to 1919 and Shanghai, where founder Cornelius V. Starr built a business around a lucrative, relatively untapped insurance market. Starr’s company later received an unorthodox boost when he worked with the U.S. Office of Strategic Services during World War II to create an intelligence unit that gleaned information from insurance documents.

When Greenberg took the reins in 1968, AIG was a privately held company. Greenberg, a compactly built son of a taxi cab driver, eventually became a figure in both New York and Washington, where he counted Henry Kissinger and Reagan CIA director Bill Casey among his confidantes. The World War II and Korean War veteran had a temper, a gift for growth and a restless mind. He had transformed AIG into a global titan and now wanted to do more.

It might not even be too speculative to suggest that close contact with Wall Street could have had a corrosive effect on the spooks and their product.

“A Crack in The System: Second of Three Parts”, by Brady Dennis and Robert O’Harrow Jr., Washington Post, December 30, 2008.

“Downgrades And Downfall: Third of Three Parts”, by Robert O’Harrow Jr. and Brady Dennis, Washington Post, December 31, 2008.

“The Crash: 2005-2008″, supplementary info on AIG story, Washington Post, undated.