Thank you, America: AIG mulls suing for insufficient bailout
posted at 8:51 pm on January 8, 2013 by Mary Katharine Ham
Here’s AIG’s entry into the series of suck-up commercials bailed-out entities have had to run in the wake of the 2008 financial crisis. On one hand, I appreciate the gesture. On the other, the thank-yous ring a bit hollow, the sorrys are non-existent, and they’re always a little heavy on the triumphant return theme. Somehow the cool cinematography of the Eminem Chrysler comeback commercial just doesn’t do it for me when I know I helped pay his fee.
But I get it. This is about brand rebuilding. There are plenty of people at AIG working to do right by both taxpayers and shareholders, and plenty of areas of this huge company that had nothing to do with the financial collapse in the first place. But at AIG, brand rebuilding is clearly a one step forward, two steps back kind of operation:
Fresh from paying back a $182 billion bailout, the American International Group has been running a nationwide advertising campaign with the tagline “Thank you America.”
Behind the scenes, the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: thanks, but you cheated our shareholders.
The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”
As Megan McArdle notes, the board is in a bit of a pickle, here. A major shareholders and former CEO filed the lawsuit in 2011 and is urging the company to join, and their obligation to shareholders may dictate they at least consider it:
Presumably the board, who are not actually morons, know that it is a terrible idea to go forward with this lawsuit. Morally, it’s outrageous. Practically, it would be far more trouble than it is worth: suing would (rightly) inflame its US customers against the company, and wouldn’t do much for its relationship with regulators, either. Insurance is one of the most heavily regulated businesses there is, and no insurer pisses of its supervisors without very good reason.
But along comes Hank Greenberg, AIG’s colorful former chief, pushing them to join his quixotic lawsuit. The board has an obligation to pursue things that are in the shareholders’ best interests. To be sure, it’s hard to see how such a lawsuit could possibly be in the actual best interests of any shareholder; a judge is unlikely to be sympathetic, and a jury would be even less so, so this seems like a bunch of pointless brand damage. Nonetheless, shareholders who disagree with that judgement might sue.
They’re gonna need more commercials.
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I love that term! I missed The Bible last night, but a link on Drudge has a UK Mail story with pictures. The devil in the episode looks a lot like Obama. Is that where you got the name? :-)
Liam on March 18, 2013 at 11:14 AM
For now. The GOP has successfully redefined “conservatism” in such a manner as to effectively neuter their ability to be an opposition party. The only chance we have now to not end up as EU West is our citizens’ exercise of natural rights that our government wishes to supress. It won’t be a court ruling, it won’t be a written law that saves us. It will be the ultimate acknowledgement of the law that supersedes man’s law. I only hope and pray that such acknowledgement doesn’t have to come with bloodshed; the American people will not roll over like the Euroweenies did.
gryphon202 on March 18, 2013 at 11:15 AM
The top end theft in Cyrpress has been bumped to 15.26%
dogsoldier on March 18, 2013 at 11:17 AM
I am the last person that will argue that Obama is a good leader or would wish for fewer powers. Just because he might wish to be a Hugo Chavez or Fidel Castro doesn’t make him one. The very fact that he has to meet with Republicans in Congress to get much of anything done proves that he is unlike the other two, who could pretty much do whatever they wanted when they awoke in the morning.
Resist We Much on March 18, 2013 at 11:22 AM
Ouch! If someone has $100K dollars, the government arbitrarily lifts $15,260.
Liam on March 18, 2013 at 11:23 AM
He’s been office for over four years. This “charm offensive” is a new thing only because the GOP is holding fast on normal order proceedings instead of allowing Boehner to give away the store in closed door negotiations.
But beyond that. The administration chooses which laws it will ignore (DOMA, pot possession, border enforcement) and creates de facto laws out of E.O.s (DREAM ACT, HHS Mandate). He’s got a cult following just like Chavez or Castro. A following that is based on giving ignorant greedy people stuff instead freedom and opportunity. He, his filthy wife and mini-moochers blow through billions of taxpayer dollars a year on vacations even as few individuals have seen their spending dollars increase. The man hasn’t submitted his budget to Congress AS REQUIRED BY LAW to have been done two months ago. Yet, we find he’s already booked no-talent pop stars for a birthday party next January.
Tell me again why you think Satan-in-a-hoodie doesn’t do whatever he wants?
Happy Nomad on March 18, 2013 at 11:32 AM
No. The top end is for depositors with 500k euros. Basically what they’re floating now is simply a bank deposits tax using the American “progressive” taxation system as a model.
gryphon202 on March 18, 2013 at 11:32 AM
Ah, OK. Last I read, which was yesterday, those with over $100K got a rate over 10%. Seems like they’re scrambling over there, playing the old class-envy game to make the scheme more palatable.
Liam on March 18, 2013 at 11:36 AM
When he starts having people lined up against the wall and shot or media outlets shut down in the middle of programming and presenters arrested on air, then comparisons to Hugo Chavez and Fidel Castro will be appropriate.
Resist We Much on March 18, 2013 at 11:36 AM
I believe Obama has yet to submit a budget to congress — at all. Or am I thinking of Congress’ refusal to pass a budget bill?
gryphon202 on March 18, 2013 at 11:37 AM
Which is exactly what they’ll do here. Count on it.
I’m personally not comparing Obama to Chavez or Castro. I’m comparing him to the Eurozone leaders who are using class envy to effect wholesale theft of private depositors’ bank balances. It can happen here. And at the rate things are currently going, it will happen here. It’s just a matter of time.
gryphon202 on March 18, 2013 at 11:41 AM
He submitted several, but as I recall they got no votes at all.
dogsoldier on March 18, 2013 at 11:46 AM
Only those with 500k Euro or more and it’s retroactive.
dogsoldier on March 18, 2013 at 11:47 AM
I hope you’re right. I suspect you’re wrong.
runawayyyy on March 18, 2013 at 11:48 AM
This tax/theft is a form of cruelty. How long did it take for those people to save the money in their accounts, especially those who have modest to meager savings? This is just another reason to hate socialism and despise its adherents.
Liam on March 18, 2013 at 11:48 AM
No, he’s submitted decidedly unserious budgets in past years. They were essentially wish lists that made no pretense at budget reduction and had no legitimate chance of passing both houses of Congress. The last one didn’t even get a single Dem Senator to vote for it.
It was like a child angry that he was being forced to do homework so he did a half-assed job knowing full well it was a paperwork drill.
Happy Nomad on March 18, 2013 at 11:51 AM
ZeroHedge reports that the 15.26% will be targeted for those with over 100k retroactively, if the Parliament has a 0% theft bracket. They are considering that for deposits under 20k.
dogsoldier on March 18, 2013 at 11:52 AM
I wasn’t responding to you.
Resist We Much on March 18, 2013 at 12:01 PM
If there was one idea that had been, in effect, totally banned from civil discourse — the idea that the government could confiscate private property that was held in trust by banks — this was it. I still can’t believe they even tried to implement an idea like this, much less that they’d even speak of it, in an everything’s-on-the-table way, in public. I can’t see getting out of the problem caused by this totally irresponsible proposal, now. The cat is out of the proverbial bag, and worse it’s not a cat but the open box of Pandora’s.
So, it makes me wonder if the purpose of it was to intentionally undermine capitalism in order to make way for something else, because everyone involved in considering it knew what would happen if it was suggested. Reasoning and reassurance will not matter now to the public. People will not have any trust that banks can be a place to put your money if you want to keep it and withdrawals from accounts will be widespread. And the amount withdrawn does not need to be everything, but only a small fraction for the system to be ruined.
Dusty on March 18, 2013 at 12:15 PM
The whole bank raid on those that save their money is a test, a test to see what the individual will do in response – how far we will go. Here is what they are doing, they come out with a plan to tax 10% of savings for those accounts over 100K euros, and 6.75% for those under 100k euros. Then when people complain that they are being robbed the establishment backs away just ever so slightly such as reducing it to 3% for those under 100K, and still 10% for those over 100K euros. Then, instead of calling it what it really is, they call it a tax.
People we all need to wake up. Take your money out of banks, you’re not making anything off of interest thanks to the Fed.
MoreLiberty on March 18, 2013 at 12:21 PM
Idiotic moves like this always have – and always will – empower and aid the rise of despots.
Should they even attempt something like this in Italy, Beppe Grillo will become PM and not just control the lower house, the Chamber of Deputies. He may be a “funny guy,” but he has much in common with Mussolini.
Resist We Much on March 18, 2013 at 12:28 PM
Much more likely is a government seizure of 401K accounts, with a “promise” of a defined benefit on the back end. But without the ownership rights – survivorship, collateral, etc. Which is why I don’t use such retirement accounts.
besser tot als rot on March 18, 2013 at 12:30 PM
I can only assume that these clowns don’t wan anyone in Europe to put their money in a European bank. If that’s not their plan, then they’re pretty stupid.
besser tot als rot on March 18, 2013 at 12:31 PM
I have similar reservations about this. I’ve seen commenters on other boards talk about how dumb this was but I know these people aren’t THAT dumb – they know what the response would be. It’s pretty obvious. There is some greater plan or objective here than just raising 6 billion euros.
tommyboy on March 18, 2013 at 12:35 PM
I read the current president of Cypress is a communist. They are that dumb. Communism and socialism don’t work and they never will.
dogsoldier on March 18, 2013 at 12:40 PM
While I won’t argue that the EU, the EMU, and the IMF don’t have other ideas and greater plans, they do. Just know that these people are pretty dumb. The two are not mutually exclusive. They have continuously proven both their nefariousness and their idiocy over the years. Jean-Francois Revel brilliantly wrote about them in Last Exit to Utopia. As he said, one would have thought that the collapse of the Soviet Union and fall of the Berlin Wall would have proven to the European Left that socialism/communism or as they say today “ever greater union” was an utter failure, but, no, not to them. In their view, the collapse of the Soviet Union and fall of the Berlin Wall didn’t prove the failure of socialism because neither was representative of “real” socialism/communism. Rather, Lenin, Stalin and their successors in the Soviet Union and Eastern Bloc had “perverted” Marx’s ideas.
So, they will continue to cry “Forward!” to the past even though their objective has been proven a failure innumerable times.
Resist We Much on March 18, 2013 at 12:46 PM
Am I missing something in my reading of the newspaper articles. The articles say that the bailout is of the banks not the Cypriot government. Reading Ed’s article indicates that it is the Cypriot government’s debts that are being bailed out. This looks to me like a straight transfer from EU/IMF to depositors in the banks in exchange for haircut on current deposits.
Cyprus has deposit insurance for it banks similar to the U.S. It insures up to 100K Euro. Cite. Nothing I’ve read indicates taht Cyprus is unable to meet this requirement. This deal looks like an effort for Cyprus’s banks to get the EU and IMF to pay for the amounts over 100K Euro in the form of a bailout. The EU and IMF said: “fine. You want that 16 Billion bailout, you need to give the depositors a hair cut totaling 6 Billion.” In other words, Cyprus your depositors need to lose some skin for us to give you the bailout.
EU/IMF are not required to give bailout. If EU/IMF don’t give this bailout, the depositors over 100K euro will get zero. So choice is between get hit with a 10-15% haircut or a 100% haircut.
My reading of this is that Cyprus’ government doesn’t want all the Russian depositors to go away, so they are looking for anyway to make sure they don’t have to impose the 100K deposit insurance limit. Bad idea to commit to a deposit insurance guarantee in a monetary unit you don’t control. One of many bad choices by Cyprus.
I don’t understand why people under the 100K Euro guarantee are being asked to take any haircut though. That just seems stupid. Probably because the Cyprus government doesn’t want to chase away the big money Russians by making the full cost fall on the rich.
Important to remember that when you deposit money in the bank, that is an asset to you but a liability to the bank. In effect you have loaned your money to the bank, for them to do with as they see fit (within constraints of banking regulations). Therefore your bank deposit from the bank’s perspective is seen the same way as a loan or bond. And just like bonds/loans in certain circumstances all of the principal may not be paid back (i.e. haircut). The only back up to this is the Deposit Insurance of the host government (FDIC in U.S.). When you are looking at loaning your money to a bank (i.e. depositing), you should always be mindful of 1) deposit insurance limits; 2) who is insuring those deposits; 3) whether they can actually fully insure those deposits.
New_Jersey_Buckeye on March 18, 2013 at 12:47 PM
Naah. Not anticipating a massive run on the banks as a result of these actions is an infinitely higher magnitude of dumb than just naively thinking you can make communism work. It’s Ashley Judd stupidity.
tommyboy on March 18, 2013 at 12:49 PM
No. The current president of Cyprus (note spelling) is Nicos Anastasiades. He leads what passes for the right-wing political party “Democratic Rally”. Only been in office for 3 weeks though. Unfortunately, this bailout and haircut appears to be all his.
Former president of Cyprus was a communist though: Demetris Christofias.
New_Jersey_Buckeye on March 18, 2013 at 1:07 PM
LOL!!
The bank run anticipation is why they made the deal retroactive. Whatever money was in Cypriot banks at the time the agreement was made in Brussels is what will be taxed. That was reported on Zero Hedge. I dunno if they will be able to do that.
Cypress’ constitution expressly forbids retroactive taxation according to one poster there.
dogsoldier on March 18, 2013 at 1:10 PM
Hmmm ok. What I read was incorrect. Sorry for the bad information!
dogsoldier on March 18, 2013 at 1:11 PM
Yes they will. I have less faith in them than you do. Your faith in them is ironic given what was demonstrated in the last election.
totherightofthem on March 18, 2013 at 1:20 PM
We’re all Cypridiots now….
Taxation, inflation, millstones. Some assembly required.
wytshus on March 18, 2013 at 1:21 PM
This is the kind of stunt that warrants armed resistance.
Othniel on March 18, 2013 at 1:25 PM
Breaking on Drudge:
Cypriot banks to close until Thursday
Bedford Falls Savings and Loan. Maybe they’re hoping the cash will get busy and make little euros overnight.
BobMbx on March 18, 2013 at 1:44 PM
On the flip side, how long will the taxpayers of Germany, the Netherlands, Denmark, etc, continue to meekly foot the bill for the Club Med members? The Cyprus bailout has the unbelievable effect of making taxpayers in countries like Estonia bailout Russian oligarchs, who have be laundering their money through Cypriot banks for years.
This is just the latest example why the EMU project was always doomed.
Resist We Much on March 18, 2013 at 1:48 PM
The EU politicians are playing with fire. This will not end well….
I predict by the end of the week….several large European banks will be in flames.
And several of the EU politicians will be thrown into the bankfires.
redguy on March 18, 2013 at 1:59 PM
They won’t. It will be a EU civil war.
redguy on March 18, 2013 at 2:00 PM
Thats if they still exist by Thursday…..
redguy on March 18, 2013 at 2:01 PM
Who better to pay for a Cyprus bailout than Cypriots? OTOH, this only gets a sub-set, those who have money in the bank. But better Cypriots than Germans, French, etc.
MTinMN on March 18, 2013 at 2:26 PM
Just wondering how it looked in print. Sort of a rehearsal, or like one of those pre-written obituaries newspapers used to keep on file.
farsighted on March 18, 2013 at 2:32 PM
Hence my use of the qualifier “personally.”
gryphon202 on March 18, 2013 at 2:41 PM
Some will roll over. But it’s worth mentioning that the Continental Army only had the support of 1/3 of the colonial populace at the height of the American Revolution. If there is to be a 2nd revolution, so be it.
gryphon202 on March 18, 2013 at 2:43 PM
If that. At the beginning – Lexington, Concord, Bunker Hill – estimates have public support for the rebellion at as little as 1/20. One of the interesting subplots of the War for Independence are the ebbs and flows of public support, usually indicated by the surges of volunteers or the waves of defectors, as the conflict progressed. Most people don’t care about the principle of the issue, they simply want to be on the winning side.
Ace ODale on March 18, 2013 at 2:56 PM
They had the benefit of England being a long ways away, across an Ocean and being easily identifiable. It was providence that allowed us to earn freedom then. Today when things go south, as he did with the Israelites one many occasions, he will turn his back on us for throwing away the gift he gave us and turning our back on him.
astonerii on March 18, 2013 at 2:57 PM
Fanatics Who’ll Do Anything To Save The Euro
Resist We Much on March 18, 2013 at 3:01 PM
Another commenter here already mentioned the likelyhood of the Fed revaluing and reissuing the currency as a means of thwarting the “hoarding tax.” Best investments will be to purchase items that have long shelf lives and sustained value (Ammo, groceries, booze, cigs, etc.). If the feces really hit the fan then even gold and silver will be subordinate to hard, practical goods and services.
Ace ODale on March 18, 2013 at 3:02 PM
0bamacare says the IRS can raid your bank accounts starting in 2014.
The EU just beat us to it.
The Cypriots have massive natural gas reserves, why doesn’t the EU just confiscate those instead? Europe needs natural gas, because the largest provider is Russia, and they use it as economic leverage.
The EU is just trying out this little experiment to see if they can do it. They will unveil it on the bigger countries next after a few “adjustments”
elowe on March 18, 2013 at 3:37 PM
Step 1: Government FDIC style insurance to secure and cover any account under 100,000 Euros.
Step 2: Violate the Legal agreement under Step 1, steal a bunch of money from people; but promise this is a “one time thing” and you can be trusted, while you’re breaking a previous agreement you had specified was still in existence last week.
Step 3: Act shocked when the people you’re robbing and lying to don’t seem to trust you.
…
I don’t see how this makes anything better; but I do see how things will get worse in a hurry.
Anyone else in line to give this a try?
http://marketdailynews.com/2013/03/18/banking-chief-calls-for-15-looting-of-italians-savings/
So Italy wants a run on their banks too? I’m sure that’s possible… anyone else?
http://www.standard.co.uk/business/business-news/cyprus-bank-savings-raid-hits-italy-spain-greece-and-portugal-as-investors-dump-bonds-8539038.html
Well at least Spain, Greece, and Portugal aren’t openly asking to be next… but they’re on the block.
Is there some reason to WANT a run on the banks in multiple nations?
gekkobear on March 18, 2013 at 3:47 PM
You’ll have to ask the governments in bed with the bankers that. I honestly have no idea. My best guess is that once the system collapses, there will be a Cloward-Pivenesque tyrant waiting in the wings to establish a dictatorship.
gryphon202 on March 18, 2013 at 5:24 PM
I’m thinking that they’re going to change their minds. Maybe nobody actually thought that stealing significant amounts of money from the KGB and the Russian mafia was a bad idea…but I’m sure that a few people are getting reminders.
John_G on March 18, 2013 at 9:02 PM
You assume the ensuing chaos isn’t completely intentional? This stinks of Soros’ modus operandi.
CapnObvious on March 19, 2013 at 3:09 PM
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