Rep. Darrell Issa, R-Calif., the ranking minority member of the panel, criticized the calling of Mr. Greenberg as a witness, saying he was "troubled" Mr. Greenberg was the only witness at the hearing.

The congressman said Mr. Greenberg brought with him a "dark cloud which the majority, in its briefing memo, dismisses as 'not the subject of this hearing.'"

Rep. Issa also charged that by having Mr. Greenberg give his opinions on why the AIG bailout strategy should be changed, "I'm worried that the committee is growing out of touch with the contemporary bailout issues."

He explained that the committee should be talking to the current chairman and CEO, Edward Liddy, as well as officials at the Treasury Department, the Federal Reserve and the Securities and Exchange Commission.

He said that Mr. Greenberg "has been a recurring figure in criminal and civil investigations by the Department of Justice and the Securities and Exchange Commission," and added that news reports indicate SEC action against Mr. Greenberg on securities fraud charges "could come at any day" and there are good reasons to believe he could face even more significant legal problems."

Under questioning later by Rep. Issa, his lawyer, David Boies, confirmed that Mr. Greenberg had received a Wells Notice from the SEC indicating he could be the target for legal action. Mr. Greenberg was notified in May of 2008.

The notice, he said, did not deal with the accounting fraud case tried last year in U.S. District Court in Hartford, Conn., where Mr. Greenberg was mentioned as an unindicted co-conspirator. That proceeding led to the conviction of four former executives of General Reinsurance and a former American International Group executive for a fraud that deceived AIG investors through a sham reinsurance transaction in 2000.

But Rep. Edolphus Towns, D-N.Y., chairman of the panel, the House Committee on Oversight and Government Reform, defended his decision to start his investigation into AIG, saying he didn't want to interfere with current investigations by other agencies.

He added that the hearing will be only the first concerning AIG and that Mr. Liddy will testify soon, and "there will be a comprehensive review of the AIG problem."

In his testimony, Mr. Greenberg said it would have been cheaper for the government if it had walled off AIG Financial Products, the troubled unit of the company, "and provided guarantees to AIGFP's counterparties rather than putting up billions of dollars in cash collateral to those counterparties. Guarantees would have sufficed."

He said AIG's problem was a liquidity problem, not a solvency problem. In such circumstances, said Mr. Greenberg, "the goal of government should be to provide temporary liquidity to save jobs and keep the gears of the financial situation operating smoothly."

The former AIG head said the goal of government "should not be to liquidate large companies that have demonstrated that they can succeed if properly managed; it should be to restore them so that they can be employers and taxpayers."

He called the failure "a management problem" under questioning from Rep. Towns.

His approach, Mr. Greenberg explained, would be to abandon the liquidation approach and "focus instead on rebuilding AIG so that it is better positioned to pay back the taxpayer."

He defended his management of the company, but said that after he was forced out, "my successor [Martin Sullivan] didn't pay attention to the problems [at AIGFP]."

And, he added, after Mr. Sullivan left, "the new management didn't pay much attention either." Mr. Greenberg said after his own departure there was no "control and management oversight at AIGFP."

The company's problems developed then, in Mr. Greenberg's view, because it lost its "triple-A" status with financial rating firms.

"When they lost the 'triple-A' rating, they should have slowed the writing of credit default swaps [at AIGFP]. They should have called a halt," he said.

In response to a question from Rep. Elijah Cummings, D-Md., who has led the outcry against retention bonuses AIG has paid to executives of AIGFP, which have been the subject of heavy criticism, Mr. Greenberg said, "I don't accept responsibility for AIG's problems."