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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 ra

by 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.
  - OGinparadise 14y ago
    "That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation." Do you really think that the banks (already in the brink of bankruptcy) would have ponied up tens of billions so AIG would continue to operate? I don't think you know how much of the world's finance AIG controlled via their insurance. http://en.wikipedia.org/wiki/American_International_Group#Federal_Reserve_bailout http://en.wikipedia.org/wiki/American_International_Group#Fe...
    - deleted 14y ago
      [deleted]
    - fleitz 14y ago
      I happen to have had a Bloomberg terminal on my desk the day AIG was bailed out. Lets just say I have a pretty good idea of what AIG meant to the economy. For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity.
      - paganel 14y ago
        > For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity. Around the same time US Treasury Secretary Hank Paulson was begging people on his knees for the rescue of Wall Street (http://www.guardian.co.uk/business/2008/sep/27/wallstreet.useconomy1 http://www.guardian.co.uk/business/2008/sep/27/wallstreet.us...) and no-one generally had any idea if the Western financial system as it was right then had much to live. I say that AIG depending on (private) third parties for its rescue would have meant certain bankruptcy.
      - OGinparadise 14y ago
        "For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity." So why didn't they? Maybe because they were BROKE and people were wondering which bank would collapse the next morning. AIG gobbled over $100 billion in a month or so, otherwise they would have defaulted and everything would've been toast. That same week even the mighty Goldman Sachs kissed Buffet's ring and got $5 billion from him, yet you expect dozens of top banks, with different exposures and interests, getting together to put up $150+ billion in a few hours. This is recent and I remember it really well.
icambron 14y ago
> 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. That misses the point, I think. It's perfectly fair for you as a taxpayer to complain that it's a sweetheart deal for Goldman and shouldn't be where your money goes. That's all fine, but it doesn't help AIG's claim that it's been mistreated. The whole purpose of bailing out an insurance company is to make sure it can pay out its policies. The public has no interest in helping AIG's shareholders per se, so of course the government going to drive a deal that screws them as much as possible in the process of getting what it wants. And it should -- like the company, if it's going to make a deal, it should make one that best serves its stakeholders. And if AIG thought the deal sucked, it should have said no and entered bankruptcy (a perfectly reasonable thing for a company to do). But it took the deal because the board, who represents the shareholders, thought that was the better of its two options. So now their stuck with a deal that they wish were better, but I don't see why anyone owes them that. In other words, maybe the public's best option was to let AIG fail, and maybe AIG's best option was to let AIG fail, but I don't see the scenario in which the government is being unfair to AIG.
hristov 14y ago
There is no legitimacy to that claim. They did not have to take the deal. The government did not owe them anything. Maybe there was something about the bailout being really a Goldman bailout, and if someone can prove actual corruption there, maybe there could be grounds for the Government to sue Goldman. But there is no reason here the Government would owe AIG anything out of this.
kahawe 14y ago
>There is some legitimacy to that claim Just because AIG ended up being some half-lucky and double-dumb middleman does not give them any legitimacy for such claims what-so-ever. They are nothing but lucky to still be there and the whole governmental stepping-in is not even a natural part of the system, while bankruptcy very, very much is.

by sudonim 14y ago

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.
- OGinparadise 14y ago
  "That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation." Do you really think that the banks (already in the brink of bankruptcy) would have ponied up tens of billions so AIG would continue to operate? I don't think you know how much of the world's finance AIG controlled via their insurance. http://en.wikipedia.org/wiki/American_International_Group#Federal_Reserve_bailout http://en.wikipedia.org/wiki/American_International_Group#Fe...
  - deleted 14y ago
    [deleted]
  - fleitz 14y ago
    I happen to have had a Bloomberg terminal on my desk the day AIG was bailed out. Lets just say I have a pretty good idea of what AIG meant to the economy. For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity.
    - paganel 14y ago
      > For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity. Around the same time US Treasury Secretary Hank Paulson was begging people on his knees for the rescue of Wall Street (http://www.guardian.co.uk/business/2008/sep/27/wallstreet.useconomy1 http://www.guardian.co.uk/business/2008/sep/27/wallstreet.us...) and no-one generally had any idea if the Western financial system as it was right then had much to live. I say that AIG depending on (private) third parties for its rescue would have meant certain bankruptcy.
    - OGinparadise 14y ago
      "For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity." So why didn't they? Maybe because they were BROKE and people were wondering which bank would collapse the next morning. AIG gobbled over $100 billion in a month or so, otherwise they would have defaulted and everything would've been toast. That same week even the mighty Goldman Sachs kissed Buffet's ring and got $5 billion from him, yet you expect dozens of top banks, with different exposures and interests, getting together to put up $150+ billion in a few hours. This is recent and I remember it really well.

icambron 14y ago

> 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. That misses the point, I think. It's perfectly fair for you as a taxpayer to complain that it's a sweetheart deal for Goldman and shouldn't be where your money goes. That's all fine, but it doesn't help AIG's claim that it's been mistreated. The whole purpose of bailing out an insurance company is to make sure it can pay out its policies. The public has no interest in helping AIG's shareholders per se, so of course the government going to drive a deal that screws them as much as possible in the process of getting what it wants. And it should -- like the company, if it's going to make a deal, it should make one that best serves its stakeholders. And if AIG thought the deal sucked, it should have said no and entered bankruptcy (a perfectly reasonable thing for a company to do). But it took the deal because the board, who represents the shareholders, thought that was the better of its two options. So now their stuck with a deal that they wish were better, but I don't see why anyone owes them that. In other words, maybe the public's best option was to let AIG fail, and maybe AIG's best option was to let AIG fail, but I don't see the scenario in which the government is being unfair to AIG.

hristov 14y ago

There is no legitimacy to that claim. They did not have to take the deal. The government did not owe them anything. Maybe there was something about the bailout being really a Goldman bailout, and if someone can prove actual corruption there, maybe there could be grounds for the Government to sue Goldman. But there is no reason here the Government would owe AIG anything out of this.

kahawe 14y ago

>There is some legitimacy to that claim Just because AIG ended up being some half-lucky and double-dumb middleman does not give them any legitimacy for such claims what-so-ever. They are nothing but lucky to still be there and the whole governmental stepping-in is not even a natural part of the system, while bankruptcy very, very much is.