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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Oh oh!

KOOLAID2 on January 8, 2013 at 8:54 PM

…how much are they giving for the Inauguration?

KOOLAID2 on January 8, 2013 at 8:55 PM

If they go ahead with that lawsuit, I think AIG will have just volunteered itself into being re-nationalized.

Stoic Patriot on January 8, 2013 at 8:56 PM

dafuq?

DarkCurrent on January 8, 2013 at 8:56 PM

so this seems like a bunch of pointless brand brain damage. Nonetheless, shareholders who disagree with that judgement might sue

…fixed it!

KOOLAID2 on January 8, 2013 at 8:57 PM

The government picks the winners and losers and the winners scoff.

Corporal Tunnel on January 8, 2013 at 9:00 PM

Isn’t this like Alien VS Predator?

sharrukin on January 8, 2013 at 9:03 PM

Whatever.

I can’t find .22 bullets for reloading anywhere, isn’t that more important than this?

Bishop on January 8, 2013 at 9:06 PM

Reaping what has been sown.

nobar on January 8, 2013 at 9:07 PM

Thanks, Chris Dodd!

It was a middle-of-the-night amendment added to the Federal Deposit Insurance Corporation Improvement Act of 1991 by the Gentleman Senator from the “Great State of MBNA” that NO ONE read that allowed the Federal government and Federal Reserve to be able to bailout insurance companies, investment firms, etc, without the approval of Congress.

Oh, and F-U, Bush and Paulson! I just “adore the penthouse view” that we bailed out with taxpayer dollars for AIG, along with propping up the “Shariah-compliant insurance products.” /

Resist We Much on January 8, 2013 at 9:11 PM

AIG mulls suing for insufficient bailout

Sandra Fluck sues for insufficient orgasm..

Welcome to Amerika

Electrongod on January 8, 2013 at 9:14 PM

Ha, I know two of the people in that commercial :D

Ukiah on January 8, 2013 at 9:16 PM

Uh, they sort of have a point? The only reason the federal investment worked out was because they had the option to shortchange preferred stakeholders by unconstitutionally circumventing contracts.

theperfecteconomist on January 8, 2013 at 9:16 PM

I get the feeling there’s a lot more to all this than what we’re hearing. Have no idea what it is, though but I’m sure we were screwed somehow.

BTW, anyone else not able to access the HA home page?

Dr. ZhivBlago on January 8, 2013 at 9:18 PM

Oh, and F-U, Bush and Paulson! I just “adore the penthouse view” that we bailed out with taxpayer dollars for AIG, along with propping up the “Shariah-compliant insurance products.” /

Resist We Much on January 8, 2013 at 9:11 PM

While Bush and Paulson have their roles in the AIG bailout to answer for (namely, approving it), the biggest part of it was initiated and quarterbacked by Turbo Tax Timmy Geithner.

Steve Eggleston on January 8, 2013 at 9:28 PM

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.

BEN PROTESS
and/or MICHAEL J. DE LA MERCED

.
I love a good drama. . : )
.
HEY MKH … you need to “weigh-in” on that thread about Brent Musberger and A.J. McCarron’s girl friend.

listens2glenn on January 8, 2013 at 9:29 PM

Sandra Fluck sues for insufficient orgasm..

Help, pass me the…

https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcQPYXa5GGG_ZyYhBBRcMcrk0CzTLLFzTID-Vn06lJSk_lRWMwIuFA

guido911 on January 8, 2013 at 9:29 PM

Recovery.Gov- Track The Money

Funding for Federal Contracts, Grants and Loans
February 17, 2009 – September 30, 2012
=======================================

http://www.recovery.gov/Pages/default.aspx

canopfor on January 8, 2013 at 9:41 PM

Greenberg and Starr got squashed in no uncertain terms today when they tried the same suit against the FRBNY. The same will likely happen with his suit against the Feds.

lexhamfox on January 8, 2013 at 9:56 PM

MKH you might want to look at the ruling in NY today. The judge went out of his way to be harsh on the claim. He’s pretty damned lucky the shareholders don’t sue him. They probably should given his personal role in those lines.

lexhamfox on January 8, 2013 at 10:02 PM

While Bush and Paulson have their roles in the AIG bailout to answer for (namely, approving it), the biggest part of it was initiated and quarterbacked by Turbo Tax Timmy Geithner.

Steve Eggleston on January 8, 2013 at 9:28 PM

Oh, I know it. As President of the NY Fed, he was the main architect of TARP. Remember, his tax problems had to be ignored because he was the “only” person who understood TARP, they cried. I remember thinking, “Sure hope he doesn’t get hit by a bus./”

While Geithner, Bernanke, and Paulson have earned my enduring hatred, I never had much in the way of expectations from them. Although I suffered no delusions about Bush, fiscal conservatism, and crony capitalism, I was disappointed that he went along with all of the bailouts and the Mafioso tactics used by Paulson (You’re not leaving this room until you agree to be bailed out!). I shouldn’t have been. It’s just the way they roll and roll over.

Resist We Much on January 8, 2013 at 10:18 PM

Uh, they sort of have a point? The only reason the federal investment worked out was because they had the option to shortchange preferred stakeholders by unconstitutionally circumventing contracts.

theperfecteconomist on January 8, 2013 at 9:16 PM

What TPE said. GM and Chrysler preferred stakeholders should be suing, too, along with the dealerships that were arbitrarily and illegally closed by federal fiat.

obladioblada on January 8, 2013 at 10:54 PM

MKH you might want to look at the ruling in NY today. The judge went out of his way to be harsh on the claim. He’s pretty damned lucky the shareholders don’t sue him [Greenberg]. They probably should given his personal role in those lines.

lexhamfox on January 8, 2013 at 10:02 PM

lexhamfox on January 8, 2013 at 11:22 PM

If its a Delaware corporation, then the Board can make a business judgment would do more harm than good and refuse to sue. Under such a situation, a derivative action could suceed only if it were shown to be irrational. A decision not to sue would not be irrational here obviously.

blammm on January 9, 2013 at 7:27 AM

Good for them. Steal every dollar.

It’s Baghdad Spring 2003, in case anyone hasn’t noticed. Grab everything that isn’t bolted down.

HitNRun on January 9, 2013 at 7:43 AM

Yeah, I hate these BS commercials as well. It only reminds people of what a clusterfark it all was.

That said, don’t blame Greenberg for suing and fighting. He got royally screwed by Client #9 (or whatever) Spitzer. Spitzer’s prosecution was horribly unethical and corrupt. AIG was taken down with GREAT help from the government… which later “bailed” them out, but not before using them as a head on a stick to show the blood thirsty mob, and destroying billions in shareholder value.

Sugar Land on January 9, 2013 at 8:31 AM

Uh, they sort of have a point? The only reason the federal investment worked out was because they had the option to shortchange preferred stakeholders by unconstitutionally circumventing contracts.

theperfecteconomist on January 8, 2013 at 9:16 PM

I’m not a financial lawyer – I don’t even play one on T.V. – but, it doesn’t sound like the lawsuit is saying they didn’t get enough money or a big enough bailout. It’s seems to be saying that the bailout was structured in such a way that money/value was taken away from people that are supposed to have the most legal protections in an investment (preferred stock holders) and funneled toward other people as payoffs (the Wall Street clients).

Considering that similar things happened at GM (preferred stockholders were screwed while Unions were covered) it appears to be the standard MO of the government.

Obviously, I’d prefer not to have bailouts, but, if we are going to have them, I don’t want them to include payoffs for the various parties’ preferred constituents.

Now, it’s possible that’s not what happened here, but, isn’t that for a court to decide?

If we just say, “You got a bailout so you don’t get to question how it was structured or where the money went just shut up and smile!!!!” we are saying that the very people that have the best information about how things went down don’t get to raise any flags about how things went down.

JadeNYU on January 9, 2013 at 11:16 AM

JadeNYU on January 9, 2013 at 11:16 AM

Just realized it looks like I might have been quoting theperfecteconomist and then attempting to refute what he said.

I quoted them because I agreed. I just forgot to start out with “I agree.”

JadeNYU on January 9, 2013 at 11:22 AM

Uh, they sort of have a point? The only reason the federal investment worked out was because they had the option to shortchange preferred stakeholders by unconstitutionally circumventing contracts.

theperfecteconomist

Ya know I kinda, sorta, grudgingly hafta agree.

Many of us got our knickers in a twist when Obama’s thugocracy bullied the senior bondholders at GM, violating more laws than I can count.

In the light of reason is the principal here any different?

Goose = Gander?

Although the end result is going to be like sticking a toothpick in a sore tooth, it just hurts like hell.

E9RET on January 9, 2013 at 12:27 PM