The bank is considering joining a lawsuit against the federal government over the bailout
AIG confirmed to Reuters today that it is considering joining a shareholder lawsuit against the federal government over the bailout, on the grounds that it deprived shareholders of billions of dollars.
The New York Times reported Monday night:
The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. 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 lawsuit was filed by Hank Greenberg, AIG’s former chief executive, in 2011. In an upcoming book, Greenberg writes that because of the bailout, AIG was “ultimately taken over and run aground by a cadre of auditors, lawyers, outside directors, and government officials,” according to Bloomberg, which obtained an excerpt. “Contrary to proponents of anointing such professionals as ‘gatekeepers’ who police against corporate misconduct, the AIG story shows how such custodians run amok.”
The New York Fed dismissed the allegations on Tuesday. “AIG’s board of directors had an alternative choice to borrowing from the Federal Reserve and that choice was bankruptcy. Bankruptcy would have left all AIG shareholders with worthless stock,” a representative told Reuters.
AIG, which the government rescued in 2008 to the tune of $182 billion, rather ironically just launched an ad campaign called ”Thank you, America,” in which it thanks the country for the bailout.
Jillian Rayfield is an Assistant News Editor for Salon, focusing on politics. Follow her on Twitter at @jillrayfield or email her at email@example.com. More Jillian Rayfield.
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