AIG May Sue US over Terms of Government Bailout
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After paying back its $182 billion bailout, the American International Group is now considering joining a 2011 lawsuit filed against the US government, alleging that federal officials imposed unfair bailout terms on the company while rescuing it from the collapse during the financial crisis.
After paying back its $182 billion bailout, the American International Group is now considering joining a 2011 lawsuit filed against the US government, alleging that federal officials imposed unfair bailout terms on the company while rescuing it from the collapse during the financial crisis.
The decision, announced yesterday by AIG, drew harsh criticism and angry condemnation by US lawmakers who described the prospect of a lawsuit “insulting to the public” and added that the insurer should not “bite the hand that fed them for helping them out in a crisis.”
However, in its defence, AIG said it is duty-bound to consider the lawsuit brought by its former chief executive Maurice “Hank” Greenberg, and his holding company Starr International, stating that the company’s 2008 bailout was unconstitutional.
“Specifically, in November 2011, Starr filed a lawsuit in the United States Court of Federal Claims and the United States District Court for the Southern District of New York alleging, among other things, that the Government’s 2008 receipt of a 79.9 percent equity interest in AIG constituted a wrongful “taking” without just compensation, in violation of the United States Constitution,” AIG wrote.
AIG’s board is scheduled to meet today to review the case and is expected to respond to Starr’s demand by the end of the month. Starr’s complaint seeks approximately $25 billion in damages.
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Legal action by AIG would be shocking, given that the company has just launched a high-profile television ad campaign called “Thank you, America,” in which it offers the public its gratitude for the bailout. On Tuesday, AIG promoted the ads on Twitter, even as it came under fire over a possible lawsuit.
Robert Benmosche, president and chief executive at AIG, said:
[quote] AIG has paid back its debt to America with a profit, and we mean it when we say thank you to the American people. At the same time, the Board of Directors has fiduciary and legal obligations to the Company and its shareholders to consider the demand served on us and respond in a fair, appropriate, and timely manner. [/quote]
The White House declined to comment on the potential for a lawsuit but defended the $182.3 billion bailout. On Tuesday, the New York Federal Reserve said there was no merit to any allegations that the bank harmed AIG.
“AIG’s board of directors had an alternative choice to borrowing from the Federal Reserve and that choice was bankruptcy. Bankruptcy would have left all AIG shareholders with worthless stock,” a representative of the bank said Tuesday.
On December 11, 2012, the U.S. Treasury sold its last remaining portion of AIG stock, ultimately earning a profit of about $5 billion. The Federal Reserve ultimately realised a profit of about $17.7 billion from its role in AIG’s 2008 bailout.
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