Wednesday, January 9, 2013

AIG Should Sue!

Yes I said it! However, before you decide to jump down my throat, let's review the facts and take a moment to fully understand what's going on here. I'm going to reflect on a Christmas morning conversation that I had with my Republican friends in upstate New York. Now, they may not agree with me on this matter (I've yet to build up the stamina to check in with them), but the statement that rang through my head as I read the details of this AIG vs. The American People debacle, were the words of one of my dear friends, "Capitalism is great, because it has the ability to make the tough decisions that humans just can't make."  This is true and indicative of American economics. If I were a less knowledgeable person who didn't know anything about American business or the rationale for our economic decisions, all someone would need to do is recite that statement about capitalism and I would fully understand what the deal was. 

I can scream and preach all day and all night until I am blue in the face about the importance of placing humanity on a higher pedestal than capitalism. It doesn't mean squat because humanity will not put food on my table or keep the lights on, that is the job of capitalism, 
profit's offspring. 

Rock with me for a moment here...... the situation.......

We all know about the great economic collapse of 2008, and we all recall a certain Wall Street organization that rose to fame because they were the baddest mofo's in the school yard, just kicking all the other kids' asses up and down the yard: 


Government Name - American International Group


Street Name - AIG

AIG's financial indiscretions were so egregious that they had other offenders of greed and corruption giving them the side eye like "whoa you took it too far dude." Most normal french fry eating, freedom loving Americans knew of AIG as an insurance company. Hell many of us had a policy somewhere in our portfolios that was more than likely underwritten by AIG. So when the party came to a screeching halt in September of 2008, we were all confused. How in the hell do you screw up insurance policies? Chris Rock phrased insurance perfectly when he referenced it as "in case shit." That is what insurance is, so how in the world did AIG come to sustain loses so dramatic that it put them on the welfare line? A simple one word answer - GREED. 


Now here is where the fun comes in.... In 2008 AIG received about $85Bn from the Federal Reserve Bank of New York. This did not stop the bleeding, so later on through the Troubled Asset Relief Program (TARP) they were given an additional $182Bn. The most of any organizations involved in TARP. These funds came from you and I, and they pulled AIG back from the edge of the cliff. 


Fast forward to 2012 - 2013, AIG has repaid The Federal Reserve Bank of New York and the US Treasury. In December the US Treasury sold off the remaining shares they owned in AIG. We made a cool $22Bn profit from the deal. AIG even thanked us with this cool commercial.....




Oh how nice of them. Doesn't this make you feel all cool and tingly inside??? Today, Wednesday, January 9, 2013 AIG is actually deliberating on just how thankful they should be.

In 2011, the former Chief Executive Officer of AIG Maurice Greenberg filed a lawsuit against the US Treasury citing that they gave AIG a bad deal. In what reads like a case of predatory lending, the suit claims that the deal's overall 92% controlling stake, high interest rates on repayment and overall exorbitant amounts of funding spread to the firm's clients, ultimately cheating shareholders out of just compensation. They even go as far as to say that the terms and conditions of TARP violated the 5th Amendment of the US Constitution. (just compensation for the confiscations of private property)  I'll let The Janitor weigh on that. 

I say let them sue, because they have every right to and should. If you say you are supportive of capitalism and believe that the US Constitution should be protected and defended, this is the case for you. Mr. Greenberg and his firm are doing what a CEO is supposed to do, act in the best interest of the shareholders at all times. I know that its a hard pill to swallow, but we can't give the US Treasury a pass, if they brokered a shitty deal to TARP recipients. Because that ultimately means they cheated with our money. This sounds like the ingredients of a payday loan. The suit is not disputing the fact that the company was in dire straights and in desperate need for the funds, but they feel that they were taken advantage of because of the severity of their situation. If this is the case, then they are right and have a valid point. 

Look at it from this point of view, imagine you fall on tough times. You are behind on all of your bills, specifically your rent. You finally get a notice from your landlord that you will be evicted in two days if you don't come up with $3800 in the back rent because you've missed so many payments. You have two days, so you scour the town in search of a loan, but no one will loan you any money. In the 11th hour, the police are parking their car on your block and are about to throw you out. In comes you aunt who says, I got you, here is $3800. However, I am now moving in to your second bedroom, I am going to take 1/3 of the food in your refrigerator and you have to repay me the $3800 at an interest rate of 672%.  You are going to take the money because you have no choice and are in dire straights. This is how AIG's shareholders feels. 

What do you think.........

1) Based on the terms of TARP as we know them, did AIG receive a bad deal?
2) Should the rules and worship of capitalism prevail in this manner?
3) Do you think AIG will join the suit?
4) Should AIG join the Greenberg lawsuit?


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