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Rescued by a Bailout, A.I.G. May Sue Its Savior

85 points by ejstronge 14y ago

damian2000 14y ago
Surely the problem with their argument is that when they were bailed out they did have a choice; it was either accept the terms or go under. So if they accepted the govts terms, why should they now be allowed to argue they got ripped off.
- smsm42 14y ago
  Would you accept this reasoning for any deal? Because there are many folks now that claim banks tricked them into accepting unfair deals - even though they were perfectly free to deny these terms and reject the deal. There are many other situations where you can be offered an unfair deal and still be able to sue even if it's voluntary transaction - e.g., if you are offered to be hired and because of your race, your employer says you'd be getting 10% less salary. If you don't like it, you can reject the job, nobody's forcing you. But the law still says offers like that are not legal. So the notion that there's a choice does not always mean the deal is OK. Obviously, the concept that if they had a choice, they cannot argue they were wronged does not work in current law. Why deals with the government should be an exception? The AIG may be indeed wronged or may be they are full of it, but unless you reject the whole legal tradition that there can be unfair deals, that needs to be figured out looking at the facts and can not be rejected just because they agreed to it.
  - viscanti 14y ago
    There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) and racism. Lenders take creditworthiness into account all the time. I'd have to image destroying your company, with your only other alternative being bankruptcy, as being a valid reason for having a higher than normal interest rate. There's certainly some risk there, and there isn't anyone who was going to come along and bail out the government if their bailout money was lost by AIG. There was a greater than 0% chance that the government would end up with 0$ (losing everything they "invested"). In order for them to agree to take on that risk, they needed a suitable interest rate in return. At the time the deal was made, comparable "junk" bonds were at or above that interest rate. It's just the return that investors want for such a risky investment. It's not at all like racism.
    - smsm42 14y ago
      There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accept that some voluntary deals can be unfair. >>>> In order for them to agree to take on that risk, they needed a suitable interest rate in return. Of course. Nobody doubts that and nobody claims the money should have been provided for free. What is argued is the conditions were unfairly onerous. This may be pure bullshit and conditions might have been just fine, but voluntarity does not prove or disprove it, it is irrelevant once you accept, as US law does, that voluntary deals can be not OK. You can not have one without the other.
      - viscanti 14y ago
        The examples you've given for voluntary deals not being OK were for protected classes. There's no such protections for companies who have run their company into the ground and need a bailout. Agreeing to a deal, no matter how onerous the contractual requirements is perfectly legal if you're not a protected class, and AIG was not a protected class. Even given that, a 14% interest rate and being asked to pay back contractually obligated debt don't seem to be onerous. Companies (and individuals) with poor creditworthiness are asked to do that all the time. It's certainly not a historically onerous agreement, and it's in-line with the returns investors were seeking for similarly risky investments at that time.
        smsm42 14y ago
        So what you are saying some people are better than others and have preference before the law because they are "protected class" and since AIG shareholders do not belong to this class the law and fairness works differently for them. I see.
sharkweek 14y ago
This really makes my blood boil, but I'm trying to remain impartial while reading. The highlight of the article: > Judge Paul A. Engelmayer wrote that while Starr’s complaint “paints a portrait of government treachery worthy of an Oliver Stone movie,” the company “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.” Sure, the terms might have seemed "unfair" but what could they possibly expect? It was "accept some harsh terms for royally screwing up or go under." It's not like they were some innocent bystander; they made some really stupid decisions and paid the price. Side note: those "thank you" commercials feel so terribly disingenuous;
- Alterlife 14y ago
  AIG is trying to get money out of the situation. That's what companies do, and apparently this is what companies are supposed to do.
  - varjag 14y ago
    Normally companies make money by providing a product or service. Granted, that's something AIG wasn't very good with lately, but I'm not sure suing the government for money is a sustainable business model.
  - DeepDuh 14y ago
    The main problem seems to be that litigation in court is lucrative in the American system. It's not just righting something wrong, to cover ones damages, it's about making money you couldn't make otherwise. And that's when suing becomes a business model. It's amazing to me how the USA is still so innovative despite that legal insecurity.
- ChuckMcM 14y ago
  I agree with the emotion but I can also see the argument that the agreement was made under duress. If you are about to die and the only person who could save you, offers to do so, but asks you to agree to something reprehensible in exchange for saving you, what do you do? At the risk of creating a strawman (the goal is illustration not substitution) let us construct a scenario, you're hanging by a rope which is breaking, you have maybe 10 minutes before it breaks. And the only person who can save you says, "Ok, I'll save you on the condition that in the near future I will come to you and ask you to do something for me, and you must agree to do what ever I ask." What if your savior asks you to blow up an airplane? Or sell your spouse into the sex trade? or any of a dozen things you would never do voluntarily and are counter to your values. This is the kind of thing that novelists use to create tension, its very effective. So AIG claims here that the Government went too far in its ask, and has crossed some line into moral turpitude. Who is the bad guy? the good guy? Doesn't really matter though, its one of those chickens they talk about that come back to roost. Never a good thing.
lostlogin 14y ago
With government contract work here in New Zealand I have noticed a willingness to call in the lawyers very early. If the contract were with a private enterprise there is no way a contract would get renewed, however the government is happy to deal with people even after after they have been sued recently. This may not we a world wide phenomenon.
- btilly 14y ago
  I have seen it noted that common law countries in general tend to resort to lawyers early and often. Indeed when comparing major construction in different countries, having a common law legal system is a risk factor for having much higher costs.
  - anigbrowl 14y ago
    You've probably read it already, but I really enjoyed Robert Kagan's book Adversarial Legalism on this subject. http://www.bsos.umd.edu/gvpt/lpbr/subpages/reviews/kaganal.htm http://www.bsos.umd.edu/gvpt/lpbr/subpages/reviews/kaganal.h...
deleted 14y ago
[deleted]
DigitalSea 14y ago
It's not like the government forced them to take the bailout. They could have declined and sunk into bankruptcy, they had a choice and they should live by that choice. If the company were run honestly and competently they wouldn't have ever been put into that situation in the first place. I'd like to call this whole scenario karma, ain't it a bitch?
msellout 14y ago
However annoying this is, there is some truth to the claim that the takeover of AIG was a "backdoor bailout" of other firms. Somewhat like the IMF loaning money to countries like Thailand and South Korea during the Asian financial crisis. The bailout money went straight through the immediate recipients and on to their creditors.
sudonim 14y ago
From the article: "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.” From a different HuffPo article for context: "When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system." http://www.huffingtonpost.com/2011/01/26/goldman-sachs-aig-backdoor-bailout_n_814589.html http://www.huffingtonpost.com/2011/01/26/goldman-sachs-aig-b... Say what you will about A.I.G being a douche joining a lawsuit against the Gov. Some ex-Goldman Sachs people brokered a deal that made Goldman whole at the cost we-the-people and with bad terms to A.I.G. There is some legitimacy to that claim -- whether or not in the public perception it looks like AIG biting the hand.
- adrr 14y ago
  If AIG would have went bankrupt, shareholders would have got nothing. After all the liabilities paid out(to the wall street clients who had credit default swap contracts), there would have been nothing left. US put 170 billion into a company worth $2 billion(market cap at the time) for 92% stake. There is no legitimacy to the claim.
  - fleitz 14y ago
    That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. Given the fiscal situation I'm sure they would have seen the error of their ways. AIG being liquidated would have been possibly the worst thing for AIG's creditors and the best outcome possible for the people of the United States. The government used the assets of AIG for it's own purposes and did not compensate the shareholders, the government was perfectly at liberty to let the institution collapse, but instead chose to prop it up.
mtgx 14y ago
They really don't care about that. When they were very close to bankruptcy, they would've done whatever the government would've asked them to do. Soon after the bailouts, they weren't even going to meet with Obama to talk about further banking regulations. I'm talking about the top banks in general.
infinityetc 14y ago
From the article: > The choice is not a simple one for the insurer. Its board members, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. If the board does not give careful consideration to the case, Mr. Greenberg could challenge its decision to abstain. Which is reiterated by the expert they interviewed: > “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.” It may seem reprehensible, but they are obligated by law as a public company with obligations to its shareholders to at least consider it. Whether they join or not, and under what merits, should be how we judge them.
charonn0 14y ago
I cannot express how disgusted I will be should AIG join the suit. The notion that AIG was somehow wronged by the government in this case is beneath contempt.
OGinparadise 14y ago
Any corporation too big to fall should be too big to exist. No company should be allowed to hold hostage our entire financial system.
- techsupporter 14y ago
  That makes for a nice sound bite but how do you decide it? I'm not even opposed to the idea (I'm overwhelmingly in favor, actually) but what mechanism is used to establish "too big to fail?" I realize that we can't legislate on the basis of "unforeseen consequences," but legislation by bumper sticker slogan is just as bad.
  - aschearer 14y ago
    Presumably using the same metrics and observations that go into the decision to bail out these organizations?
  - robryan 14y ago
    This probably doesn't work, but couldn't the government have let AIG fail and just focused on returning something to it's creditors?
  - rjtavares 14y ago
    Every antitrust law is affected by that problem. If subjectivity is a problem then you shouldn't be in charge.
  - OGinparadise 14y ago
    I didn't propose a law, it was a principle and details can be worked out. For example you can start by deleting the past 10-20 years that created such monsters. Citibank, BOFA, Goldman Sachs etc were /are too big to exist in the current form so they need to be broken up. If they fail because they made stupid bets for short term bonus cash, they go bankrupt and not many people care.
  - kahawe 14y ago
    >what mechanism Obviously SOME sort of mechanism was used when the decision was made FOR the bail-outs. How about you very simply start there? You can always improve later.
smsm42 14y ago
It's kind of funny that the government apparently (if AIG claims are true) did the same to them as what politicians long criticized the bankers for doing as "predatory lending". I.e. if you consider that using one's bad situation to trick him into a loan which terms are unduly onerous is despicable thing to do for a bank - shouldn't be the same thing despicable for the government? On the other hand, if it's OK for the government to do, they shouldn't really use this "predatory lending" term anymore - at least not in a legal context. In a generic rhetoric, you can say "charging this much for a loan really sucks, you're a giant douche if you do that" but legally if it's OK for the government shouldn't it be OK for others?
- anigbrowl 14y ago
  Yes, the board of directors of AIG are exactly like financially illiterate people trying to get a mortgage to buy their own home.
  - Mvandenbergh 14y ago
    I'd like to see them try and prove they were taken advantage of by referencing their own incompetence. "Your honor, the defence claims that we were sophisticated investors but look at what we did. Are these the acts of a sophisticated man who knows what he's doing?"
    - sswaner 14y ago
      You are glossing over the fact that the current board of directors are not the same people who got the company into trouble in 2008. They are the ones who turned the company around. They also have the same mandate as the board of any other publicly traded company: maximize value for the shareholders.
      - Mvandenbergh 14y ago
        >You are glossing over the fact that the current board of directors are not the same people who got the company into trouble in 2008. That doesn't bear on whether they could (jokingly obv.) claim to be an unsophisticated victim of predatory lending, only the board at the time matters for that. The board can run the company the way they want, barring gross misconduct or fraud, the shareholders had their say at the AGM.
newman314 14y ago
Just posted a related article from Rolling Stone. http://news.ycombinator.com/item?id=5025234 http://news.ycombinator.com/item?id=5025234 It's both mindblowing and disgusting the extent which banks have manipulated things to the point where they have their cake and eat it too.
- retube 14y ago
  Rolling Stone has a huge anti-bank bias. The material they present is usually misleading, out of context and often plain wrong or mis-informed. This is absolutely not a credible source on the financial crisis. Indeed Matt Taibbi is basically just a troll.
  - Uchikoma 14y ago
    It would help your argument if you cite misleading, plain wrong, out of context or misinformed parts of the article to make your point.
    - retube 14y ago
      Sure. But I have a day job and no time to put together critical analyses of random stuff on the internet. Plus I don't really care what other people chose to believe.
anigbrowl 14y ago
So going by the number being sought (I haven't bothered to read the complaint), the government should only have taken an 85% stake instead of a 92% stake? This seems like an instance of chronic denial by Greenberg and his remaining admirers - anything to put the blame on someone else.
Zenst 14y ago
So X company screw up, needs bailout as without would cease to be and all shareholders would lose there money at the very least if they did not get a bailout. This impacts non-shareholders who inderiectly impacted by less money in goverment to finance other area's. Company pays back the bailout and now the shareholders are crying they want more money as they think it was unfair in the first place. Can we just label them financial terroists and put them all in orange oneseys and then see who is laughing about it. Bottom line what a bunch of utter cnuts. I hope the goverment and the people educate them fully and don't use any lube whilst doing it.
martinced 14y ago
AIG should STFU and be glad to be living in a socialist economy. In a real free capitalist economy they'd be dead. It sure would have brought turmoil but... The sooner this fake economy goes down, the earlier real recovery can start. We're only pushing the can down the road and, meanwhile, creating all the necessary condition for a much harder landing. Nicolas Nassim Taleb said that companies like GS and AIG should STFU and that their employees should be getting minimum wages (and certainly not more bonuses). You have to realize that AIG is effectively on "life support" as Taleb puts it. When you're on life support because you screwed and when an entire country is bleed by taxes to keep you alive (all the money that went to AIG is taxpayers money), you better STFU. I can't even begin to understand the various people explaining here that the terms were not reasonable. Next time let GS / AIG and all the ones benefitting from the "crumbs of capitalism" as Buffet puts it (i.e. finance) to die a horrible death.
debacle 14y ago
I worked with AIG in the weeks after the bailout. This does not surprise me. I've never felt less good about the work I was doing.
jheriko 14y ago
Maybe I am missing something, but all I see here is 'rich people want to have their cake and eat it - and btw at the expense of joe public'. Maybe I just find it hard to think its anything other than greed when the company involved is an organised scam... er insurance company. ;)

85 points by ejstronge 14y ago

damian2000 14y ago

Surely the problem with their argument is that when they were bailed out they did have a choice; it was either accept the terms or go under. So if they accepted the govts terms, why should they now be allowed to argue they got ripped off.

smsm42 14y ago
Would you accept this reasoning for any deal? Because there are many folks now that claim banks tricked them into accepting unfair deals - even though they were perfectly free to deny these terms and reject the deal. There are many other situations where you can be offered an unfair deal and still be able to sue even if it's voluntary transaction - e.g., if you are offered to be hired and because of your race, your employer says you'd be getting 10% less salary. If you don't like it, you can reject the job, nobody's forcing you. But the law still says offers like that are not legal. So the notion that there's a choice does not always mean the deal is OK. Obviously, the concept that if they had a choice, they cannot argue they were wronged does not work in current law. Why deals with the government should be an exception? The AIG may be indeed wronged or may be they are full of it, but unless you reject the whole legal tradition that there can be unfair deals, that needs to be figured out looking at the facts and can not be rejected just because they agreed to it.
- viscanti 14y ago
  There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) and racism. Lenders take creditworthiness into account all the time. I'd have to image destroying your company, with your only other alternative being bankruptcy, as being a valid reason for having a higher than normal interest rate. There's certainly some risk there, and there isn't anyone who was going to come along and bail out the government if their bailout money was lost by AIG. There was a greater than 0% chance that the government would end up with 0$ (losing everything they "invested"). In order for them to agree to take on that risk, they needed a suitable interest rate in return. At the time the deal was made, comparable "junk" bonds were at or above that interest rate. It's just the return that investors want for such a risky investment. It's not at all like racism.
  - smsm42 14y ago
    There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accept that some voluntary deals can be unfair. >>>> In order for them to agree to take on that risk, they needed a suitable interest rate in return. Of course. Nobody doubts that and nobody claims the money should have been provided for free. What is argued is the conditions were unfairly onerous. This may be pure bullshit and conditions might have been just fine, but voluntarity does not prove or disprove it, it is irrelevant once you accept, as US law does, that voluntary deals can be not OK. You can not have one without the other.
    - viscanti 14y ago
      The examples you've given for voluntary deals not being OK were for protected classes. There's no such protections for companies who have run their company into the ground and need a bailout. Agreeing to a deal, no matter how onerous the contractual requirements is perfectly legal if you're not a protected class, and AIG was not a protected class. Even given that, a 14% interest rate and being asked to pay back contractually obligated debt don't seem to be onerous. Companies (and individuals) with poor creditworthiness are asked to do that all the time. It's certainly not a historically onerous agreement, and it's in-line with the returns investors were seeking for similarly risky investments at that time.
      - smsm42 14y ago
        So what you are saying some people are better than others and have preference before the law because they are "protected class" and since AIG shareholders do not belong to this class the law and fairness works differently for them. I see.

sharkweek 14y ago

This really makes my blood boil, but I'm trying to remain impartial while reading. The highlight of the article: > Judge Paul A. Engelmayer wrote that while Starr’s complaint “paints a portrait of government treachery worthy of an Oliver Stone movie,” the company “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.” Sure, the terms might have seemed "unfair" but what could they possibly expect? It was "accept some harsh terms for royally screwing up or go under." It's not like they were some innocent bystander; they made some really stupid decisions and paid the price. Side note: those "thank you" commercials feel so terribly disingenuous;

Alterlife 14y ago
AIG is trying to get money out of the situation. That's what companies do, and apparently this is what companies are supposed to do.
- varjag 14y ago
  Normally companies make money by providing a product or service. Granted, that's something AIG wasn't very good with lately, but I'm not sure suing the government for money is a sustainable business model.
- DeepDuh 14y ago
  The main problem seems to be that litigation in court is lucrative in the American system. It's not just righting something wrong, to cover ones damages, it's about making money you couldn't make otherwise. And that's when suing becomes a business model. It's amazing to me how the USA is still so innovative despite that legal insecurity.
ChuckMcM 14y ago
I agree with the emotion but I can also see the argument that the agreement was made under duress. If you are about to die and the only person who could save you, offers to do so, but asks you to agree to something reprehensible in exchange for saving you, what do you do? At the risk of creating a strawman (the goal is illustration not substitution) let us construct a scenario, you're hanging by a rope which is breaking, you have maybe 10 minutes before it breaks. And the only person who can save you says, "Ok, I'll save you on the condition that in the near future I will come to you and ask you to do something for me, and you must agree to do what ever I ask." What if your savior asks you to blow up an airplane? Or sell your spouse into the sex trade? or any of a dozen things you would never do voluntarily and are counter to your values. This is the kind of thing that novelists use to create tension, its very effective. So AIG claims here that the Government went too far in its ask, and has crossed some line into moral turpitude. Who is the bad guy? the good guy? Doesn't really matter though, its one of those chickens they talk about that come back to roost. Never a good thing.

lostlogin 14y ago

With government contract work here in New Zealand I have noticed a willingness to call in the lawyers very early. If the contract were with a private enterprise there is no way a contract would get renewed, however the government is happy to deal with people even after after they have been sued recently. This may not we a world wide phenomenon.

btilly 14y ago
I have seen it noted that common law countries in general tend to resort to lawyers early and often. Indeed when comparing major construction in different countries, having a common law legal system is a risk factor for having much higher costs.
- anigbrowl 14y ago
  You've probably read it already, but I really enjoyed Robert Kagan's book Adversarial Legalism on this subject. http://www.bsos.umd.edu/gvpt/lpbr/subpages/reviews/kaganal.htm http://www.bsos.umd.edu/gvpt/lpbr/subpages/reviews/kaganal.h...

deleted 14y ago

[deleted]

DigitalSea 14y ago

It's not like the government forced them to take the bailout. They could have declined and sunk into bankruptcy, they had a choice and they should live by that choice. If the company were run honestly and competently they wouldn't have ever been put into that situation in the first place. I'd like to call this whole scenario karma, ain't it a bitch?

msellout 14y ago

However annoying this is, there is some truth to the claim that the takeover of AIG was a "backdoor bailout" of other firms. Somewhat like the IMF loaning money to countries like Thailand and South Korea during the Asian financial crisis. The bailout money went straight through the immediate recipients and on to their creditors.

sudonim 14y ago

From the article: "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.” From a different HuffPo article for context: "When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system." http://www.huffingtonpost.com/2011/01/26/goldman-sachs-aig-backdoor-bailout_n_814589.html http://www.huffingtonpost.com/2011/01/26/goldman-sachs-aig-b... Say what you will about A.I.G being a douche joining a lawsuit against the Gov. Some ex-Goldman Sachs people brokered a deal that made Goldman whole at the cost we-the-people and with bad terms to A.I.G. There is some legitimacy to that claim -- whether or not in the public perception it looks like AIG biting the hand.

adrr 14y ago
If AIG would have went bankrupt, shareholders would have got nothing. After all the liabilities paid out(to the wall street clients who had credit default swap contracts), there would have been nothing left. US put 170 billion into a company worth $2 billion(market cap at the time) for 92% stake. There is no legitimacy to the claim.
- fleitz 14y ago
  That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. Given the fiscal situation I'm sure they would have seen the error of their ways. AIG being liquidated would have been possibly the worst thing for AIG's creditors and the best outcome possible for the people of the United States. The government used the assets of AIG for it's own purposes and did not compensate the shareholders, the government was perfectly at liberty to let the institution collapse, but instead chose to prop it up.

mtgx 14y ago

They really don't care about that. When they were very close to bankruptcy, they would've done whatever the government would've asked them to do. Soon after the bailouts, they weren't even going to meet with Obama to talk about further banking regulations. I'm talking about the top banks in general.

infinityetc 14y ago

From the article: > The choice is not a simple one for the insurer. Its board members, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. If the board does not give careful consideration to the case, Mr. Greenberg could challenge its decision to abstain. Which is reiterated by the expert they interviewed: > “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.” It may seem reprehensible, but they are obligated by law as a public company with obligations to its shareholders to at least consider it. Whether they join or not, and under what merits, should be how we judge them.

charonn0 14y ago

I cannot express how disgusted I will be should AIG join the suit. The notion that AIG was somehow wronged by the government in this case is beneath contempt.

OGinparadise 14y ago

Any corporation too big to fall should be too big to exist. No company should be allowed to hold hostage our entire financial system.

techsupporter 14y ago
That makes for a nice sound bite but how do you decide it? I'm not even opposed to the idea (I'm overwhelmingly in favor, actually) but what mechanism is used to establish "too big to fail?" I realize that we can't legislate on the basis of "unforeseen consequences," but legislation by bumper sticker slogan is just as bad.
- aschearer 14y ago
  Presumably using the same metrics and observations that go into the decision to bail out these organizations?
- robryan 14y ago
  This probably doesn't work, but couldn't the government have let AIG fail and just focused on returning something to it's creditors?
- rjtavares 14y ago
  Every antitrust law is affected by that problem. If subjectivity is a problem then you shouldn't be in charge.
- OGinparadise 14y ago
  I didn't propose a law, it was a principle and details can be worked out. For example you can start by deleting the past 10-20 years that created such monsters. Citibank, BOFA, Goldman Sachs etc were /are too big to exist in the current form so they need to be broken up. If they fail because they made stupid bets for short term bonus cash, they go bankrupt and not many people care.
- kahawe 14y ago
  >what mechanism Obviously SOME sort of mechanism was used when the decision was made FOR the bail-outs. How about you very simply start there? You can always improve later.

smsm42 14y ago

It's kind of funny that the government apparently (if AIG claims are true) did the same to them as what politicians long criticized the bankers for doing as "predatory lending". I.e. if you consider that using one's bad situation to trick him into a loan which terms are unduly onerous is despicable thing to do for a bank - shouldn't be the same thing despicable for the government? On the other hand, if it's OK for the government to do, they shouldn't really use this "predatory lending" term anymore - at least not in a legal context. In a generic rhetoric, you can say "charging this much for a loan really sucks, you're a giant douche if you do that" but legally if it's OK for the government shouldn't it be OK for others?

anigbrowl 14y ago
Yes, the board of directors of AIG are exactly like financially illiterate people trying to get a mortgage to buy their own home.
- Mvandenbergh 14y ago
  I'd like to see them try and prove they were taken advantage of by referencing their own incompetence. "Your honor, the defence claims that we were sophisticated investors but look at what we did. Are these the acts of a sophisticated man who knows what he's doing?"
  - sswaner 14y ago
    You are glossing over the fact that the current board of directors are not the same people who got the company into trouble in 2008. They are the ones who turned the company around. They also have the same mandate as the board of any other publicly traded company: maximize value for the shareholders.
    - Mvandenbergh 14y ago
      >You are glossing over the fact that the current board of directors are not the same people who got the company into trouble in 2008. That doesn't bear on whether they could (jokingly obv.) claim to be an unsophisticated victim of predatory lending, only the board at the time matters for that. The board can run the company the way they want, barring gross misconduct or fraud, the shareholders had their say at the AGM.

newman314 14y ago

Just posted a related article from Rolling Stone. http://news.ycombinator.com/item?id=5025234 http://news.ycombinator.com/item?id=5025234 It's both mindblowing and disgusting the extent which banks have manipulated things to the point where they have their cake and eat it too.

retube 14y ago
Rolling Stone has a huge anti-bank bias. The material they present is usually misleading, out of context and often plain wrong or mis-informed. This is absolutely not a credible source on the financial crisis. Indeed Matt Taibbi is basically just a troll.
- Uchikoma 14y ago
  It would help your argument if you cite misleading, plain wrong, out of context or misinformed parts of the article to make your point.
  - retube 14y ago
    Sure. But I have a day job and no time to put together critical analyses of random stuff on the internet. Plus I don't really care what other people chose to believe.

anigbrowl 14y ago

So going by the number being sought (I haven't bothered to read the complaint), the government should only have taken an 85% stake instead of a 92% stake? This seems like an instance of chronic denial by Greenberg and his remaining admirers - anything to put the blame on someone else.

Zenst 14y ago

So X company screw up, needs bailout as without would cease to be and all shareholders would lose there money at the very least if they did not get a bailout. This impacts non-shareholders who inderiectly impacted by less money in goverment to finance other area's. Company pays back the bailout and now the shareholders are crying they want more money as they think it was unfair in the first place. Can we just label them financial terroists and put them all in orange oneseys and then see who is laughing about it. Bottom line what a bunch of utter cnuts. I hope the goverment and the people educate them fully and don't use any lube whilst doing it.

martinced 14y ago

AIG should STFU and be glad to be living in a socialist economy. In a real free capitalist economy they'd be dead. It sure would have brought turmoil but... The sooner this fake economy goes down, the earlier real recovery can start. We're only pushing the can down the road and, meanwhile, creating all the necessary condition for a much harder landing. Nicolas Nassim Taleb said that companies like GS and AIG should STFU and that their employees should be getting minimum wages (and certainly not more bonuses). You have to realize that AIG is effectively on "life support" as Taleb puts it. When you're on life support because you screwed and when an entire country is bleed by taxes to keep you alive (all the money that went to AIG is taxpayers money), you better STFU. I can't even begin to understand the various people explaining here that the terms were not reasonable. Next time let GS / AIG and all the ones benefitting from the "crumbs of capitalism" as Buffet puts it (i.e. finance) to die a horrible death.

debacle 14y ago

I worked with AIG in the weeks after the bailout. This does not surprise me. I've never felt less good about the work I was doing.

jheriko 14y ago

Maybe I am missing something, but all I see here is 'rich people want to have their cake and eat it - and btw at the expense of joe public'. Maybe I just find it hard to think its anything other than greed when the company involved is an organised scam... er insurance company. ;)