Taxpayers Fund AIG Lawsuit Against US

AIG, now infamous for their executive bonuses, has decided that the $200 billion they received from the government is not nearly enough and is suing the government for the return of $306 million in tax payments. "AIG is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that AIG. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year."

Comments

Is anyone surprised?

[seanadams.com]

Obama says "blame me", which is political-speak for "screw you, it's done, get over it". He won't be saying "blame me" when the honeymoon is over and this escalates to a full scale popular revolt.

We KNEW AIG were crooks long before we gave them this money. Why did they do it? Where the fuck was the outrage when these bailouts were first suggested? I've been outraged since the beginning, because the whole game plan has been obvious to me since they robbed us of that first $700B. And yet polls suggest that Americans STILL think this is going to work somehow.

These people: the Congress, the President, AIG, are all just a bunch of god damned frat boys, scratching each other's backs and doling out our tax money to each other in such staggering volumes that it WILL be the end of this country if we don't stop right now.

Did you all catch Chris Dodd saying he had nothing to do with the change in the bailout legislation to allow these bonuses, then the next day saying oops, that was me. "Somebody should have caught it sooner" - yeah, right, if the bill had any chance of being reviewed by the legislators themselves, let alone the public, before if slipped past Obama's desk quicker than a greased turd. What happened to those 5 days, huh?

Seriously people, at what point do we get off the couch and take back this country? Obama can stimulate my ass.

Re:Is anyone surprised?

[homer_s]

It is funny how people focus on the $165 million, but not on the $173 BILLION that was essentially paid to AIG's gambling clients. And one of those, Goldman, has a lot of their people in the treasury - Henry Paulson being one example.

I think the problem is that all big numbers pretty much look alike to most people & it is easy to create mass outrage at something people understand (bonuses to AIG execs) than something that people don't get (payments to AIG's counterparties).

Re:Is anyone surprised?

[truthsearch]

"blame me", which is political-speak for "screw you, it's done, get over it".

No, it's political speak for "the buck stops with me." In other words, something may be the fault of his staff, but the ultimate responsibility is with him. He's saying he won't simply throw someone else under the bus like previous presidents.

We KNEW AIG were crooks long before we gave them this money. Why did they do it?

My personal, uneducated opinion is that Obama felt it necessary to continue the plan that started under the last administration. During an emergency it would be very unnerving for the plan to drastically change. My guess is the hope to restore general confidence overcame the desire to fix this bungle. Also at play is the "Wall Street insiders" who laid out the last plan and continue to work for the Treasury and Fed.

Re:Is anyone surprised?

[SBrach]

Oblig. linky

Re:Is anyone surprised?

[castironpigeon]

C'mon, now. Revolt? Public outrage? That's so last century. America's too fat and happy to get off its lazy ass and do anything about this.

Re:Is anyone surprised?

[nelsonal]

We gave them money because if AIG fails, two huge things go down with them. First, Europe's big banks all of them (who used AIG to get cheap insurance--they'd suddenly need new equity on the order of 30-50 billion). Second, money market funds who would be facing much larger losses then they did with Lehman after all of AIG's derivative counterparties get first cut unsecured lenders would take huge haircuts, likely leading to several funds "breaking the buck" and a run on their virtual banks. Since sending $200 billion to AIG is much cheaper than dealing with the carnage those events would cause, the government holds its nose and hopes for the best.

Look on the bright side, with this method, the governments of the world (led by the US) would be paying for the losses anyway (both the businesses mentioned above are too big to fail) so by leaving AIG intact they get to capture the cashflows from the life, P&C and other solid insurance businesses.

Re:Is anyone surprised?

[Reality Master 201]

What you should be asking is why the Republican party is still against nationalization of banks... Because currently, the taxpayers get to enjoy all the risk, while the owners of the banks gets the profits.

Bu..buh.. but nationalizing banks, why thats... that's socialism! Having everyone but the responsible parties foot the bill for the excesses of the rich and privileged is just the American way - we're keeping the free market going!

Re:Is anyone surprised?

[tripdizzle]

It's hard not to think the huge furor about the bonuses is being whipped up as some sort of distraction

It was a distraction, while the Fed pumps another $1 trillion into circulation:
http://www.iht.com/articles/2009/03/18/business/fed.php
Which will either head off deflation (never in history been successful) or cause hyperinflation, while we are worried about 0.1% of AIG's bailout funds.

Re:Is anyone surprised?

[b4upoo]

Thank God the Obama administration is trying to do something about our economic mess. I understand that very few people have any real grasp of economics and they also don't have any grasp of just what can happen when an economy deflates. We were on the edge of a real doomsday in this situation. It seems that the cash infusion has already caused a bit of an upturn.

Re:Is anyone surprised?

[JWW]

The thing that pisses me off sooooo much is that if we had just LET THEM FAIL, AIG would have filed for bankruptcy and these contracts would have been nullified.

I've been against bailouts from the beginning. They've always appeared to me to be meant to keep the rich and powerful people (including the gov't) who SCREWED EVERYTHING UP in power and well off, while destroying everything and everyone else.

We have to endure this pain now. We have to let these giant corporations fail. We have to build everything back from the ground up. Trying as hard as the government is trying to prop up the failing companies and failed ideas that led to this mess is going to only make things much much worse.

Its hard and its not fun, but its time for the US to take its medicine. The bailouts and stimulus must stop. Hard as it is to say, I think we need to let everything fall down and then move in and start picking up the pieces and build something new.... I'm referring to the economy here, not necessarily the government. But I fear that it may need to end up getting scrapped and rebuilt too....

Re:Is anyone surprised?

[SBrach]

No, it suggests that getting angry at the guy who spends 30 seconds with your daughter and NOT getting angry with the guy who spends a whole night is backwards. There's plenty of outrage over the $165million, not so much over the $700,000million.

Re:Is anyone surprised?

[Shin-LaC]

World GDP: $65,000,000 million
Bailout: $170,000 million
Bonuses: $165 million

There: even more context and even more comparison. Surely this is even more insightful!

The fact of the matter is that:
1) $165 million is still a lot of money
2) At least the bailout was ostensibly aimed at preventing a financial meltdown that would have wrecked the economy even more. Giving bonuses to the people who caused this mess in the first place is just a big, open "fuck you" to the American taxpayers.
3) xkcd isn't a such a good comic. Yes, I get the references, but merely referencing things your audience is familiar with is a cheap excuse for humor.

Re:Is anyone surprised?

[Thaelon]

I think you're misunderstanding the outrage.

It's due to the fact that the very people in charge of messing up so badly they needed government help - are getting bonuses as though they had done exceptionally well.

It's an expression of the injustice that all of us grunts feel when the executives get all the credit when things go well, and the grunts get laid off when things go poorly.

Only in this case the overpaid executives are being rewarded as though they had done extremely well when in fact they've done so poorly they should be fired if not hanged.

Personally, I'd like to know how I could score a contract that will reward me with multi million dollar bonuses when things go horribly even after I'm no longer even employed by them. That sounds like about the sweetest gig imaginable.

Re:Is anyone surprised?

[homer_s]

AIG's counterparties were hardly gambling.

When you make an investment with an uncertain outcome, it is gambling - which is to say, all investment is gambling. I have nothing against companies who bought/sold CDSs, CDOs, MBSs, etc - it was their money and they had the right to do whatever they wanted with it.

The problem I have is that when their bets went wrong - one of the bets being that AIG was a good counterparty - they should eat the losses. They sure as hell were not going to give you a share of the profits - why should you protect them from their losses?

Gambling is ok - as long as you can take the losses.

Re:Is anyone surprised?

[arth1]

So if I buy fire insurance on your house, am I gambling?

Yes, you are. You are betting on it burning down, while the insurance company is betting against that outcome.

Like any betting operation, the odds are supposed to be stacked slightly in favour of the house, and the operation must be big enough not to allow any individual gamblers to break the bank (or, if you'll pardon the pun, burn the house).

Re:Is anyone surprised?

[Glothar]

Yes, of course that would work. Of course it would cost a little less money. The situation is not so different from the Great Depression. As all the idiots on Fox "News" were talking about this week: "the New Deal lengthened and deepened the Great Depression".

And they're right.

One way to solve these sorts of situations is just to let them fall down. Sure it hurts for a bit, but it's better to take the pain for a short time than suffer for a long time, right? Sure, times will be rough, but you just need to brace yourself and use a little common sense: don't buy a new car this year, hold off on renovating your beach house, and be a little more conservative in how you invest your disposable income.

Wait. What do you mean you don't have a beach house? You're only investment is your 401k? And your only car is already 12 years old? Well, that's gonna make it harder to stop that imminent foreclosure, but at least you can be kept warm at night knowing that your hunger is helping the country save a little bit of money.

It must feel good to be able to sit there, saying that the best solution is to let a section of the economy totally fail. I mean, its not like you're the one taking the hit, right? You're not losing your job or your house. You're not the one who actually has to endure hardship. And neither am I. I just bought a house. I'm going on vacation. I'm doing fine, but I'm not so much of an ass that I don't realize that many lower and middle-class people out there would lose many years of happiness in the name of helping the wealthy "suffer" through the economic troubles we're in.

Yes, the New Deal made the Great Depression a little worse, but it also kept people from dying of hunger or maybe only losing every bit of wealth and happiness they had been building up in their life.

Does AIG suck hardcore: Yes. Do the deserve help? Absolutely not, but the lower middle class does and they are the ones who would pay for your "let them fail" plan. I have zero sympathy for anyone in the upper-middle and upper classes who whines about how this is affecting their lives and how they feel their money is being wasted.

today's xkcd

[mattdm]

Today's XKCD seems particularly relevant. There's bigger things to worry about right now. This is a silly distraction -- like the whole "earmarks" thing.

Re:today's xkcd

[qbzzt]

There are bigger issues, but letting future company managers know they can:

1. Make their company more money in good times by taking economically unjustified risks.

2. Get the tax payer to bail out the company when the unjustified risks backfire.

and

3. Personally profit either way.

Is a really bad idea. To pick an extreme example, if the same managers knew that their companies will be bailed out, but that they personally would spend the rest of their lives in jail, they would take a lot less risks.

We need to motivate managers to be prudent in the future. Letting them reward themselves does not accomplish that.

Re:today's xkcd

[The Moof]

When AIG lays off some people, remember this:

• Bonuses are not required pay. They're rewards for performance.
• $165 million dollars could keep 2200 people employed for a year (figuring salary + benefits is $75k/yr).

So yea, a large amount of money next to an obscenely large amount of money is a small percentage, but it's still a large amount of money.

Re:today's xkcd

[Anonymous Coward]

These "bonuses" are basically their pay, and are the only reason they are working there. I don't see how it could possibly be the government's right to take the agreed upon pay away from these people.

It's simple. The company that agreed to pay them that can't afford to pay them that. A new entity (the government) came in which is not bound by those contracts. The people who obviously do not deserve any pay should consider themselves very lucky that they aren't stripped of every asset they own and then tossed out in the streets. That would be fair and just, but not many people are even suggesting it.

Once and for all people, these weren't bonuses the way most people think of bonuses. Management didn't decide to reward then, it was pre-agreed upon payment. And it would be horribly immoral for us to take them away from said recipients.

It would be perfectly moral and justified. Their employer does not have the money to pay them with. What they are paying them with is *my* money. That is fucking immoral. If you run a company into the ground, then you do not deserve anything. If you run a company into the ground and then demand that I be robbed to pay you for doing so, then...well the very idea that you're attempting to frame a moral debate with those thieves and failures as the moral entities doesn't speak well to your sanity or ethics.

Aesop's Tales

[Dr. Eggman]

Sounds like a classic case of the Aesop: The Farmer and the Snake.

During the fridge winter months, a farmer happened upon a snake frozen upon his grounds. Taking pity on the creature, he took it into his home to warm it by the fireside. Perhaps he realized they eat the rodents who would dig up his crops, and thus provided a dire function. Perhaps it was just the plain goodness in his heart. As the snake warmed itself and became animate, it leapt to forth and bit the farmer. As the farmer lay in pain (perhaps poisoned) he cried out, "Why have you bitten me, snake?!" I do believe the obvious answer was "Duh, I'm a snake."

Re:Not AIG's fault

[Rod Beauvex]

If they're too big to fail, they're too big. Period.