Apparently the Board of Directors at AIG looked at the bigger picture down the road and saw the proverbial “Scarlet G” (for greed) that would have marked their brand for a very long time.
That didn’t take long.
In the face of furious criticism from Washington and elsewhere, American International Group’s board of directors announced Wednesday the firm would not participate in a shareholders lawsuit against the government over the terms of a taxpayer bailout that saved the company from ruin.
AIG took a $182 billion bailout during the financial crisis, and the idea that it would join a lawsuit arguing the terms of taxpayers’ largesse were unfair sent steam coming out of the ears of many lawmakers and government officials.
“[R]emember the crook that broke his leg robbing a house then sued them for negligence on safety? yes, well he’s now AIG’s gen counsel,” Austan Goolsbee, the former top White House economist, said on Twitter early Wednesday.
Members of Congress were equally furious, with some sending letters to the company demanding an explanation.
“There’s an old joke about [comedian] Jack Benny,” newly retired Rep. Barney Frank (D-Mass.) told POLITICO on Tuesday. “One of the great jokes was that he had a show — where he’s walking and some guy comes up to him and sticks a gun in his face and says, ‘Your money or your life.’ And he says, ‘I’m thinking, I’m thinking.’ I mean, that’s AIG.”
One former senior administration official who worked on the AIG bailout joked Wednesday, “To paraphrase Churchill, the board did the right thing after having exhausted every other alternative.”
Lawmakers expressed a similar reaction.
“I’m pleased to hear that after receiving the largest bailout by the government to a private company in United States history, AIG has decided not to sue the taxpayers who provided it,” Rep. Elijah Cummings (D-Md.), the ranking member of the House Oversight Committee, said Wednesday.
The outrage was unleashed after news broke late Monday that AIG’s board was meeting to consider whether to join a $25 billion lawsuit over whether the terms of the bailout were unfair to shareholders, who claim they were deprived of billions of dollars.
The suit is being led by Starr International, once one of the largest investors in AIG that is led by former AIG CEO Hank Greenberg, which asked AIG to join its legal action.
The company argued it had to consider joining the legal action as part of its “fiduciary and legal obligations.”
A source familiar with the matter said AIG CEO Robert H. Benmosche told Treasury officials after the board meeting that the company always planned to reject joining the lawsuit.
The source also said lawyers for Starr International had trouble answering questions about the merits of the suit from AIG directors during the meeting.
“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,” Robert Miller, chairman of the AIG board of directors, said in a statement Wednesday. “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.”
Now, the question is how much damage the company has done to its reputation both in the marketplace and with officials in Washington.
“Interesting that despite all they’ve been through, the company still can’t seem to gauge the headline and regulatory risk inherent in their post-2008 status,” said Paul Equale, a Washington attorney and consultant. “The board plugged the hole, but it was the executive leadership that teed up the issue in the first place. Those same execs now need to do some quiet repair work in Washington.”
The controversy followed soon after what had been good news for the company: Last month the Treasury Department sold its remaining shares in AIG.
In recent weeks the insurer has been airing ads that say “thank you” to Americans for the rescue — a sentiment Benmosche assured is sincere in a statement the company released Tuesday night.
“AIG has paid back its debt to America with a profit, and we mean it when we say thank you to the American people,” said Benmosche.
- Benmosche: AIG Paid America Back, But We Still Have To Consider Suing (forbes.com)
- Outrageous! Washington’s jaw drops at possibility of AIG lawsuit… (kaystreet.wordpress.com)
- Fury at possible lawsuit by AIG (politico.com)
- AIG may join bailout lawsuit against U.S. government (news.yahoo.com)
- AIG: Thank You America, But We May Sue You (forbes.com)
- AIG considers joining lawsuit against U.S. over bailouts (latimes.com)
- AIG blinks, won’t sue over bailout (politico.com)
- Lawmakers warn AIG not to sue Washington (upi.com)
- Why AIG Says It HAS To Consider Suing The Government (businessinsider.com)