AIG says, “Thanks for the bailout, Uncle Sam! See you in court!”
Update (January 9): The day after this story broke, AIG decided not to participate in the lawsuit described below. Statement from AIG chairman Robert Miller: “In considering and ultimately refusing the demand before us, the Board of Directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders. America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us. To date, AIG has returned $205 billion to America, including a profit of $22.7 billion. We continue to thank America for its support.”
As far as I know, the original lawsuit, filed by shareholders, will go forward without the participation of the company.
Are the executives of AIG thankful for their titanic bailout, without which their company would surely have collapsed? The answer, according to the New York Times, is… somewhat nuanced. Their ad guys say, “Thank you America!” while their lawyers say, “See you in court.”
Fresh from paying back a $182 billion bailout, the American International Group Inc. 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.”
Maurice R. Greenberg, A.I.G.’s former chief executive, who remains a major investor in the company, filed the lawsuit in 2011 on behalf of fellow shareholders. He has since urged A.I.G. to join the case, a move that could nudge the government into settlement talks.
“Settlement talks” = “more public money handed over to AIG.” Well, at least we got the first $182 billion back. Eventually.
If this news leaves you sputtering with rage, rest assured that the most obvious ethical problem with this lawsuit has already occurred to the prospective defendants:
Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people, who spoke on the condition of anonymity, noted that without the bailout, A.I.G. shareholders would have fared far worse in bankruptcy.
“On the one hand, from a corporate governance perspective, it appears they’re being extra cautious and careful,” said Frank Partnoy, a former banker who is now a professor of law and finance at the University of San Diego School of Law. “On the other hand, it’s a slap in the face to the taxpayer and the government.”
For its part, A.I.G. has seized on the significance and complexity of the case, which is filed in both New York and Washington. A federal judge in New York dismissed the case, while the Washington court allowed it to proceed.
“The A.I.G. board of directors takes its fiduciary duties and business judgment responsibilities seriously,” said a spokesman, Jon Diat.
Diat makes a fair point, and it illustrates one of the inherent problems with all of these Big Government – Big Business partnership arrangements. The board of directors of any given company has a primary duty to maximize value for the shareholders. They are not presiding over crusades for “social justice,” job-creation factories, or volunteer auxiliaries for government agencies.
Much of the new spirit of corporatism (to use the less damning word for the fusion of government power and nominally independent business operations) seems predicated on the notion that corporate management will bump self-interest a few rungs down their ladder of priorities, to please their government “partners”… but in fact they are both ethically and legally obligated to look out for the interests of investors.
When that is no longer true, the system under consideration can no longer be described as “capitalism” in any meaningful sense. Strategies designed with the expectation that private citizens would be acting immorally by pursuing their own interests are not compatible with capitalism, which means they are not compatible with economic liberty. Perhaps that should have been considered more fully before AIG got their $182 billion bailout – and was in turn used as an incubator for further bailouts, as the plaintiffs in this case allege.
Normally at a moment like this, I would suggest hating the game, not the player; but since AIG’s influence helped it to write the rules of the game, I suppose we taxpayers can just go ahead and hate everything, even as we prepare to dig into our wallets once more.