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AIG Contemplates Joining Stockholder Suit Against US Gov't
inode_buddha writes "After completing its bailout rescue and paying back the money with interest, AIG is considering suing the US Government for doing so. The reasons why? Among other things, the 14% interest rate paid to the government. '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." The former CEO and current major shareholder said: "The government has been saying, 'We're your friend, we owned and controlled you and we let you go.' But A.I.G. doesn't owe loyalty to the government," a person close to Mr. Greenberg said. "It owes loyalty to its shareholders."' The lawyer representing him is none other than David Boies of SCO fame."
For not putting any of the criminals responsible for the financial collpase in prison where they belong. Now those same criminals are suing the government. Sadly the US taxpayer will once again be on the hook for the payout.
They were perfectly free to reject the taxpayer bailout and look for money elsewhere.
Will someone put these motherfuckers against the wall and shoot them already?
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AIG was a risky investment. Anyone who would have invested in AIG at that time would expect a return that balanced that risk - that includes the taxpayers.
In rough numbers, it looks like brass scrap is going for about $2.33/lb. Given the big brass balls that AIG apparently possesses, they should never have needed any sort of bailout in the first place...
(And, incidentally, if that 14% interest rate was so crushingly unfair, where exactly were the private lenders willing to offer better rates and cut big, bad, Uncle Sam out of the picture?)
I hope they win their lawsuit. If only the shareholders and bond holders of GM would do the same. What a massive money laundering scheme.
UAW supports Obama
Obama takes over most of GM shares screwing the bond holders (mostly retirement funds) in the process
Obama gives most shares to the UAW
UAW waits six months and sells the shares
Each of these steps were covered in the regular media but, for some reason I have yet to see an article putting all the steps together. If you think this is an anti-Obama thing it isn't as it would be equally as terrible if a Republican did it.
I have an even better idea: Let's get the entire population of US citizens to file a suit against the government, and all the politicians individually, for wasting our money bailing out failing companies.
Enjoy life! This is not a dress rehearsal.
Now, I wasn't in favor of the bailouts to begin with. I'm generally in favor of deregulation, and the only way that deregulated businesses learn their lesson is to be allowed to crash and burn on their own. These guys should have paid the price for their failure to understand how to do business so that the stockholders and the boards would understand in the future that they cannot allow bozos to run their businesses.
However, AIG stockholders are still in the wrong here, despite the forced bailout. How can you say you might have made more money when your other option was collapse? It's clear that the interest rate was very high, but it was well within AIG's ability to pay it (obviously). And now, those stockholders are trying to double down. No way.
Of course, this case seems so absurd on the face of it, that I must be missing something. I'm probably going to see what the details are, but at this point, it is looking like funny business.
Fuck You, you greedy parasitic assholes.
Shoes for Industry. Shoes for the Dead.
The AIG (and other) bailouts were not typical bankruptcy cases. These are initiated by creditors when the debtor can't meet obligations. The government's role (the courts) is only to oversee the terms of the reorganization/liquidation. With AIG, the court case will probably depend on who and how AIG was found to be illiquid (or under capitalized), and how the exchange of equity for a capital injection was requested. If AIG's board of directors came looking for help, the government may not be guilty of taking private property. If the BoD negotiated that deal, it was their prerogative to do so, or they are the ones shareholders should be suing (good luck with that).
One could claim that AIG management was pressured into taking the deal. But much of that pressure came from other private investment banks to keep the AIG paper they held from becoming worthless. The Lehman Brothers bankruptcy may stand as evidence of the government offering the option of allowing investment banking to solve its own problems without intervention.
Have gnu, will travel.
More like the scorpion and the frog. Except in this version, the scorpion lets the frog carry it safely to the other side of the river and then goes into a stinging frenzy. Evolution took care of the really dumb ones, I guess.
If you were blocking sigs, you wouldn't have to read this.
Banks are key infrastructure, almost like electricity and water. Our economy depends on them running smoothly. Thus, we have to treat them as a protected resource, not just some random widget maker.
One could also argue the same for the auto industry in the north east because the economy in that region was heavily dependent on a few companies. Part of the problem is that we allowed oligopolies to form such that failure is almost all or nothing: too big a granularity of change.
Oligopolies are a problem because they create "too big to fail". If there were a dozen or so car companies, then a couple of them failing wouldn't cause the same devastation.
Oligopolies often argue that they need "economy of scale" to be efficient, but that's usually just an excuse. Sub-system specialists could provide economy of scale for specific portions of cars, and perhaps facilitate more standardization.
Table-ized A.I.
This is particularly hilarious to me because AIG just started airing TV commercials giving themselves a nice big PR pat on the back for explicitly "paying back with interest".
The first 1-pager is Paulson's talking points for the bank. It basically confirms that he put a gun to all their heads. It says they must agree to take their cash, and that if they protested, then each bank's regulator would force them to take it anyway.
http://www.businessinsider.com/uncovered-tarp-docs-reveal-how-paulson-forced-banks-to-take-the-cash-2009-5
have you seen my sig? there are many others like it but none that are the same
When AIG took on the deal, their stock price was crap. They expected that once they took the deal, which was the USG buying preferred stock, which pays dividends, that the stock price would fall and stay LOWER than the buy price until the USG's stocks were bought off from payment via dividends and cash buyback. This turned out NOT to be the case and the stock price went ABOVE what the USG bought it for. What AIG is crying about, is the fact that they had to buy back their OWN STOCK from the USG, which they had an option NOT TO TAKE, at the current market rate which was, surprise surprise, HIGHER than when it sold it to the USG. There's nothing to sue over here. It was a standard loan backed by the only asset that AIG had at the time: its own stock. No "property" was bought by the government, and the government's voting rights were limited by the wording of the purchase, even though it should have had a ridiculous amount of power with that large of a percentage of *PREFERRED STOCKS*.
A companies first and foremost responsibility is to it's customers, 2nd to it's employees and finally 3rd to it's shareholders.
Um, no. At least in Texas, the directors, officers, and employees owe fiduciary duties to the company (shareholders). The company owes nothing to the customers and employees outside of any contractual duties they assume and the general legal duties like ordinary care and non-discrimination. I assume it's the same in most other states.
(More than usual, this is not legal advice.
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What a bunch of ungrateful bastards.
AIG's stock had fallen 95% in a matter of months and the company was days away from bankruptcy. If 14 percent interest was so damn high, why the hell didn't they make the deal with the private investors that were willing to go with a lower rate than the feds?
Oh, that's right, because there weren't any.
if they wanted to see how bad interest rates can be for high risk borrowers. Or a title loan on your car's title. Both semi secured debt and I think these run 25 to 30% interest rate. Yeah, cry me a river AIG.
I think their argument is full of shit. No one held a gun to their head, either when they made such piss poor decisions that got them into the mess they created or when they stood in line for the bailout. And I know that I will never see dollar one of the money they would be awarded in any lawsuit, so don't argue that you're doing this on my behalf.
Frankly, I already made my money. I bought it at the firesale for a buck a share, on the day when they were declared "too big to fail". At the moment I am writing this, those same shares are worth 35.50. AIG is just pissed off that they couldn't do the same thing, a point made by another poster here.
I'd agree with you normally, but in this case the banks are completely wrong. They're criminal, in fact. Here's a little known fact: name almost any large "institutional" bank, chances are you'll be naming a bank that was and has been complicate in the on-going laundering of drug and terrorist money. Name ANY ONE. To the tune of BILLIONS of dollars. ILLEGAL in ANY jurisdiction and punishable by YEARS in federal PRISON. NOT ONE of these "institutional" bank's major presidents, CEOs, CFO's, board members, NONE OF THEM, have been made to answer for these crimes. Fines have been paid, a billion in the case of HSBC, probably the worst offender, but NO ONE human being has been made to answer for these offenses, some of them used to fund the killing of thousands of people. "Too big to fail" was Obama said, didn't he? The government is complicate, but they at least are the one institution that is at least paying lip service to justice. Seems to me that the banks are the ones doing the screwing.
Python: 'And then suddenly you have a language which says "we're all stuck with whatever the whiniest coder wants".'
The first 1-pager is Paulson's talking points for the bank. It basically confirms that he put a gun to all their heads. It says they must agree to take their cash, and that if they protested, then each bank's regulator would force them to take it anyway.
No. The banks jumped at the money but they and Paulson didn't want the public to panic if they found out how shaky the banks really were. So Paulson made up that BS story about forcing the banks to take the money.
Source
As time goes on, we're hearing more and more about the shenanigans that were done at the expense of the US taxpayer.
If by "forced," you mean "they were desperate for money but nobody would lend to them," then you would be right. AIG could have tried to issue some corporate bonds, but would you have been willing to buy them? Would you have purchased preferred stock? Would you have loaned them a single penny when they were teetering on the edge of bankruptcy?
If the shareholders think the deal was bad, they should sue the executives who agreed to it. Of course, they all know that the only remaining alternative was to declare bankruptcy, so what this really is about is a greedy attempt to get even more money.
Palm trees and 8
"Asset Backed Paper Commodity" shit
I read that as "Ass Backed Paper Commodity shit" which if you think about is still a valid description of it and correctly describes what it should have been used for.
Time to offend someone
The suit has been filed by AIG shareholders - led by Hank Greenberg (former head and majority shareholder of AIG). He is approaching the AIG board and asking them to join the suit. The board sees the need to listen to his arguments because he is a majority shareholder and has a large number of other shareholders on his side. In short, the board is merely doing its duty and listening to the shareholders who have appointed them.
AIG, at this point, has not joined the lawsuit. At this point, your anger should be directed at the group led by Greenberg. You may also want to note that this is not the first suit that Greenberg has filed regarding this issue. Another similar suit (I believe targeted at the New York branch of the Fed) was recently thrown out. AIG was not party to that suit.
The guy pushing for the suit, Hank Greenberg, wasn't in charge of AIG at the time of the bailout. He used to run AIG, and has a less-than-sterling reputation, but the shenanigans that caused AIG's collapse did not occur on his watch.
All that said, this is a steaming pile of bullshit. The alternative to the govt. bailout (now shown to have been a REALLY good idea, given how it's made money and prevented the next Great Depression) instant bankruptcy where the shareholders would have been left with 0%, instead of the 20% of the company they ended up with.
I think this whole thing's a bit of a red herring. Yes, AIG paid back their bailout money with interest. But if I remember correctly, the government made good on all the AIG insured mortgage backed securities as part of the bank bailouts in addition to bailing out AIG itself. I could be wrong about that, but there was so much cronyism going on in the TARP process that it's safe to assume there's some bait-and-switch going on in the repayment process.
Posted from my Android phone. Oh, I can change this? There, that's better...
How can they say "without just compensation" with a straight face?
How on earth is SAVING YOU FROM COMPLETE FAILURE and producing a situation where YOU PROFITED AND EVEN NOW STILL EXIST, was not just compensation?
How about the US Government sues them for fraud and destabilizing the economy and the downstream effects of all that? Are these wall street jackasses so 'entitled' that they need to be saved and then don't credit the savior? The national guard should go to AIG and shoot these treasonous pieces of trash.
"They", in this case, refers specifically to AIG, not banks in general. AIG wasn't a bank, it was an insurance company. It wasn't a part of the general program where the Fed forced banks to borrow money; it was a separate bailout that occurred prior to the bank forced-capitalization program.
AIG, was in a gigantic liquidity crisis and would have gone bankrupt in a couple of days due to inability to borrow money to pay the influx of claims from the Bear Stearns collapse, along with paying out on the default protection insurance they had written on $hitty mortgages. Nobody would lend money to them except for the feds.
That's exceedingly narrowminded. Your mortgage terms are fixed. You might not like chase but it wouldn't actually change your terms in any way. I had exactly the same thing happen (Wamu mortgage) and all I had to do was update the info on my automatic billpay with my bank.
p.s. No one FORCED you to do a single thing.
You can get rich if you own a politician, but you have to be rich to buy one in the first place.
"Too big to fail" was Obama said, didn't he?
No, that was Illinois Republican congressman Stewart McKinney. In 1984. When the biggest bank failure prior to Washington Mutual occurred. "Too big to fail" has been policy since the mid-eighties, and law since 1991.
The road to tyranny has always been paved with claims of necessity.
Because other non government banks were foaming at the mouth to get their hands on the income from sub prime loans. Holy fuck, they thought to themselves, bonds are paying a percent or two, regular mortgages are paying four or five, and these subprimes are paying 8%? And they are rated AAA? Gimme, gimme, gimme.
What fucked Freddie and Fannie was the 80/15/5 game that brokers were using. A 100% financed home loan is inherently risky, and as such sells for a higher interest rate. But people don't want to pay that much. So what the brokers would do is split the mortgage into three parts. A super expensive 5% of the loan value, a moderately expensive 15% and then a completely normal 80% (20% down) mortgage, which they would sell to Fannie/Freddy. As far as they knew, these were completely standard loans with the normal, low risk of a 20% down mortgage. But in reality, they were far more risky because the whole deal was 0% down. So these loans that looked kosher were failing at a greater rate than they should and fucking up their cashflow. It wasn't necessarily fraud, because apparently underwriting never asked where the 20% down was coming from.