News Column

Lawmakers Warn AIG Not to Sue Washington

Jan 9, 2013

Lawmakers warned American International Group Inc. not even to think about suing Washington for allegedly hurting investor profits in its $182 billion bailout.

"Don't do it. Don't even think about it," said a letter signed by Democratic Reps. Peter Welch of Vermont, Michael Capuano of Massachusetts and Luis Gutierrez of Illinois as the AIG board was to hear arguments, pro and con, at 8 a.m. Wednesday on the 41st floor of the insurance giant's downtown New York headquarters.

"AIG became the poster company for Wall Street greed, fiscal mismanagement, and executive bonuses -- the taxpayer and economy be damned," the lawmakers' letter to AIG Chairman Robert Miller said. "Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah.

"Taxpayers are still furious that they rescued a company whose own conduct brought it down," the letter said. "Don't rub salt in the wounds with yet another reckless decision that is on par with the reckless decisions that led to the bailout in the first place."

The AIG board was to consider joining a lawsuit filed by former Chief Executive Officer Maurice Greenberg that accuses the U.S. government of making the 2008 and 2009 bailout terms too demanding, thereby forcing unacceptably high shareholder losses, court records indicate.

It argues the bailout terms violated the Fifth Amendment, which protects against abuse of government authority, the records cited by The New York Times and other news organizations indicate.

The alleged constitutional abuse the lawsuit focuses on is depriving shareholders of private property "without just compensation."

The lawsuit seeks $25 billion in damages.

AIG fully repaid its $182 billion bailout only weeks ago.

The board was to hear Wednesday from lawyers for Greenberg, arguing in favor of the board joining the lawsuit, followed by representatives of the U.S. Treasury Department and the Federal Reserve Bank of New York, the bailout architects, arguing against the lawsuit, The Wall Street Journal said.

Sen. Elizabeth Warren, D-Mass., said in a statement: "Taxpayers across this country saved AIG from ruin, and it would be outrageous for this company to turn around and sue the federal government because they think the deal wasn't generous enough.

"Even today, the government provides an ongoing, stealth bailout, propping up AIG with special tax breaks -- tax breaks that Congress should stop. AIG should thank American taxpayers for their help, not bite the hand that fed them for helping them out in a crisis."

The company has been running high-profile ads thanking U.S. taxpayers for the bailout and noting the aid earned the government a combined positive return of more than $22 billion.

AIG CEO Robert Benmosche, who succeeded 87-year-old Greenberg, said in a news release the 12-person board had a fiduciary and legal responsibility to consider the lawsuit "in a fair, appropriate and timely manner."

He said the board was expected to make a decision in "the next several weeks."

New York Fed spokesman Jack Gutt told the Journal the lawsuit's arguments were without merit.

"AIG's board of directors had an alternative choice to borrowing from the Federal Reserve and that choice was bankruptcy," Gutt said. "Bankruptcy would have left all AIG shareholders with worthless stock."

Spokesmen for Greenberg and the Treasury Department declined to comment.



Source: Copyright United Press International 2013