This has actually been going on for a while, led by former CEO Maurice “Hank” Greenberg. What brought it to the fore today is that Greenberg is trying to prevail on AIG itself to join the lawsuit.
In all this, it’s a bit hard to figure out on what basis Greenberg himself thinks he can sue the government for the intervention which saved AIG from going bankrupt. But apparently, Greenberg has three major claims.
[ol]
[li]The imminent collapse of AIG was triggered by the government actively discouraging other entities who would have been willing to invest in it, which forced AIG to accept the government’s onerous terms. (In this context it should be noted that the government ended up making a $22B profit on the deal, so the idea that others might have taken a similar role is not as far out as it might seem at first glance.)[/li][li]After the bailout, the government used technical maneuvers to do an end run around terms and provisions which were intended to preserve shareholder value.[/li][li]The government had a conflict of interest in wanting to shore up the economy, and once in control of AIG acted in the interests of AIG’s counterparties and adversely to those of AIG’s shareholders.[/li][/ol]
There are advantages for AIG in joining the lawsuit, and the big argument against it seems to be largely that it will be a huge PR nightmare and tick off the regulators as well.
It could be interesting to see how this plays out.
The allegation is that it was “sovereign wealth funds and other non-United States investors”. This is obviously something that would have to be established at a trial.
But I would note again that the government made a profit on the AIG deal, so it’s not completely out of the question that other entities might have thought this was a reasonable outcome. Especially in light of the third point noted in the OP - had the government not seized the company with the express aim of preventing a global meltdown it’s likely that AIG would have been in a much stronger negotiating position WRT its counterparties.
Err… whot ? Wasn’t the imminent collapse of AIG triggered by AIG betting and losing untold billions of dollars, getting found out and being publicly crucified for it not just by the government, but by every financial reporter with a pulse ?
This reads like some Scooby Doo villain’s ranting - “We could have gotten away with it too, if you hadn’t gone and told people exactly what was going on !”. Am I missing something here ?
Since by the terms of the bailout the government had an 80ish percent share in the company, and thus had a direct stake in “preserving shareholder value” ; and since at the time of the bailout the value of said shares was so far down the dumpster that it could be seen from China ; AND since the company recorded billion dollars in profits since… kindly fuck off ?
Not to mention of course that AIG would hardly have cleared much profits had the bottom completely fell out of the US economy… so even *if *the allegations were strictly true, how is shoring up the economy adverse to the interests of AIG shareholders ?
Beyond that, and while it is granted that financial matters are way above my paygrade, if the government was doing such a pig’s breakfast of it the shareholders could have just, I dunno, sold their fucking shares ? Isn’t that what you do when you’re about to lose your shirt on a bad investment, or when the company you’ve invested in takes a direction you think is bad ?
The arrogance of this coupled with their “Thank you America” marketing campaign puts AIG at the top of my “Most Hated Company” list.
I do however find it comical and ironic that they are bitching about interest rates and the cost of the loan when their entire business is based on premiums and fighting insurance claims for their profits.
Would only be more ironic if they were a mortgage lender
No, I think it’s the signal to pass legislation making it financially unworkable to have a company as large and as leveraged as AIG was (and is). Basically end “too big to fail” as a working business model, either through regulation or taxation.
Then in the future the government won’t be in the position of feeling they need to commit these heinous crimes.
That’s true. But the fact that you have troubles of your own causing doesn’t mean that you can be coerced into accepting any solutions that the government prefers.
A lot other firms have fallen on hard times and been bought out by other firms. For example, Warren Buffet bought a stake in Goldman Sachs at a pivotal time for that company. Done right, this type of thing can be a very favorable investment for the purchaser.
The government had an interest in preserving shareholder value but it also had a competing interest in shoring up the economy. Thus it had a conflict of interest in balancing the interests of AIG shareholders versus the interests of the economy. Specifically, I believe the allegation is, that the government was unwilling to play hardball in negotiating with AIG’s counterparties because causing hardship to the counterparties would risk the financial system, though it would benefit AIG and its shareholders.
This doesn’t seem like a serious argument. Obviously all else being equal AIG gains if the economy does well. But that doesn’t mean the amount that AIG is benefited by taking AIG money and giving it to others is worth the cost to AIG.
That doesn’t always work. Generally the stock price reflects publically known information. By the time you sell your shares have already been devalued.
To be clear, the lawsuit is being driven by former AIG CEO and current shareholder Hank Greenberg. He is not involved in the “Thank You America” campaaign. AIG needs to at least consider joining the lawsuit or they will be liable to be sued by their shareholders.
I agree with this. Though I would go with regulation over taxation.
There were no such funds that were willing to provide the funding that AIG needed to remain solvent. There was no value left in AIG and the bailout was a bad idea, in no event would AIG shareholders have gotten a better deal from its creditors.
At the very least, AIG should have gone through the same sort of reorganization that GM and Chrysler went through, making its creditors whole (on the government dime) was nucking futz.
AIG was worthless at the time. A reorganization a la GM and Chrysler would have been better.
Goldman sachs was a different case. Goldman sachs had a lot of going concern value. AIG did not.
Doesn’t matter, the shareholders would all have been wiped out without the bailout.
On what grounds? All the government needs a balance sheet from the time of the bailout. AIG was insolvent and its creditors were not in a position to be generous to the AIG shareholders. People seem to forget how bad things were back then, especially partisan dipshits like Hank Greenberg.
Remember this is the fucktard that thought the bureau of labor and statistics was cooking the books on the unemployment rate to make Obama look good.
