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AIG Contemplates Joining Stockholder Suit Against US Gov't

timothy posted about a year and a half ago | from the just-to-be-on-the-safe-side dept.

Government 354

inode_buddha writes "After completing its bailout rescue and paying back the money with interest, AIG is considering suing the US Government for doing so. The reasons why? Among other things, the 14% interest rate paid to the government. '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 former CEO and current major shareholder said: "The government has been saying, 'We're your friend, we owned and controlled you and we let you go.' But A.I.G. doesn't owe loyalty to the government," a person close to Mr. Greenberg said. "It owes loyalty to its shareholders."' The lawyer representing him is none other than David Boies of SCO fame."

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354 comments

the government screwed the bank too? (1)

ganjadude (952775) | about a year and a half ago | (#42519739)

say it aint so!

Re:the government screwed the bank too? (0)

Anonymous Coward | about a year and a half ago | (#42520067)

I don't know what you're thinking, but there was no screwing going on here. AIG (I'm assuming) signed a deal with the government in some sort of official writing. I see this as AIG trying to back out of their end of the deal. AIG signing a deal that may or may not harm other deals the company has made (with it's shareholders and investors) is no fault of the government.

Re:the government screwed the bank too? (4, Informative)

ganjadude (952775) | about a year and a half ago | (#42520173)

that is debatable. I know that some banks were actually forced to take money from the government

The first 1-pager is Paulson's talking points for the bank. It basically confirms that he put a gun to all their heads. It says they must agree to take their cash, and that if they protested, then each bank's regulator would force them to take it anyway.

http://www.businessinsider.com/uncovered-tarp-docs-reveal-how-paulson-forced-banks-to-take-the-cash-2009-5

Talk about biting the hand that feeds you (1)

Anonymous Coward | about a year and a half ago | (#42519743)

'Nuf said

Serves Obama right... (5, Insightful)

Anonymous Coward | about a year and a half ago | (#42519747)

For not putting any of the criminals responsible for the financial collpase in prison where they belong. Now those same criminals are suing the government. Sadly the US taxpayer will once again be on the hook for the payout.

Re:Serves Obama right... (-1, Troll)

Anonymous Coward | about a year and a half ago | (#42519831)

Except it wasn't Obama that bailed out AIG, tardo.

Re:Serves Obama right... (0)

Anonymous Coward | about a year and a half ago | (#42520307)

Except nobody said he did. Look in the mirror to see the "tardo"

Re:Serves Obama right... (2)

Tablizer (95088) | about a year and a half ago | (#42520151)

Lack of reporting standards is part of the reason it's been difficult to trace the blame. "A" says "B" ordered him to be a slime-ball and B denies it. It's all just verbal claims. The new financial regulations will help some of this by adding more signing and reporting requirements for certain kinds of transactions.

Re:Serves Obama right... (1)

Anonymous Coward | about a year and a half ago | (#42520415)

So please explain to me why John Corzine is not currently in jail? He lost over $600 Million to $1.2 Trillion of investor money in 401ks and no one seems to know where it went. SOX rules were supposed to prevent this, and this is a textbook case of SOX violations.

Reality is Corzine is a high ranking DNC member and is immune to prosecution because of that. Now the Feds are unable to prosecute anyone under SOX rules because they will now be sued by whoever they go after because the law will not have been applied equaly. So I fail to see how "new regulations" will change anything.

Shareholders (5, Insightful)

Anonymous Coward | about a year and a half ago | (#42519769)

They were perfectly free to reject the taxpayer bailout and look for money elsewhere.

Re:Shareholders (3, Insightful)

Bigby (659157) | about a year and a half ago | (#42519981)

I think they were forced to take a bailout. Even years later, after the "stress test" of banks, several banks were forced to take bailouts. This is an example of the "free enterprise" and "free markets" that people blame for our problems. The banking system is, and has been, so non-free market it isn't even funny. It is the most subsidized industry in the world.

Re:Shareholders (2, Insightful)

Anonymous Coward | about a year and a half ago | (#42520191)

Well you "think" wrongly. The Board of Directors voted to take the credit facility from the government completely of their own accord. This ex-CEO is an idiot. This is just to try to deflect the real blame from himself to the government.

Re:Shareholders (2, Interesting)

Anonymous Coward | about a year and a half ago | (#42520607)

It wasn't that simple. AIG was on the edge of collapse and the government was the *only* entity around big enough to bail them out. "Let them die," you say in a James T. Kirk-ish way. But AIG was also considered by the government to be one of those "too big to fail" institutions. The Treasury Department had allowed Lehman Brothers to implode the week before, but AIG was even larger and Treasury wasn't willing to let AIG go under the same way--there's an excellent chance that an AIG bankruptcy would have turned the recession into an outright depression. So AIG was basically negotiating with a gun to its head because, had they not accepted, Geithner had made it clear that he would force it on them. The Board of Directors vote was essentially to ratify something they had no choice in at all.

I'm certainly not averse to the government making sure the taxpayers get their money back. But given the circumstances at the time and that AIG had pretty much no choice in whether to take the deal or modify the terms, making AIG accept an interest rate of LIBOR plus 8.5% seemed pretty harsh.

http://online.wsj.com/article/SB122156561931242905.html

Re:Shareholders (3, Insightful)

Anonymous Coward | about a year and a half ago | (#42520599)

No, they weren't forced to do anything. Even if they were "forced" to receive the money, they weren't forced to use it. And again, if they were "forced" to use it, they weren't dictated to how to use it.

They simply took the money, knew full well what they were doing, and now, they want the company back, minus the problems.

I think the case should be thrown out of court on the first try, and put those state owned percentages on the market, at their current, real value.

This is the deciding trial for the USA. This is the moment that decides who rules that country and ultimately the world. The USA government or the corporations.

Trying to have their cake and eat it too (4, Informative)

PhrostyMcByte (589271) | about a year and a half ago | (#42520071)

This is particularly hilarious to me because AIG just started airing TV commercials giving themselves a nice big PR pat on the back for explicitly "paying back with interest".

Re:Shareholders (0)

Anonymous Coward | about a year and a half ago | (#42520481)

Except there was no money elsewhere and AIG is the biggest insurance company in the world.

1929 all over again. Same cause, some consequence.

Nothing... (0)

Anonymous Coward | about a year and a half ago | (#42519805)

... was learned...

And here we go. (0)

Anonymous Coward | about a year and a half ago | (#42519807)

1) If it's too big to fail... break it up. (once the economy recovers a bit more)
2) Don't save companies from failure.
Lather, Rinse, Repeat.

The new AIG TV commercials are hilariously sappy. Good luck with your PR campaign if you turn around and sue the US Govt/People for bailing you out.

Poor poor AIG - didn't go bankrupt.... (1)

Anonymous Coward | about a year and a half ago | (#42519817)

Government should have let AIG go under, then arrested the Executives for reckless and negligent endangerment to their employees.

A companies first and foremost responsibility is to it's customers, 2nd to it's employees and finally 3rd to it's shareholders.

Any other order makes for short-term profits, long term failure, which is why the government stepped in your fucktard loser former CEO. Go shoot yourself and save the rest of us the headaches and hassles.

Re:Poor poor AIG - didn't go bankrupt.... (4, Informative)

Zordak (123132) | about a year and a half ago | (#42520301)

A companies first and foremost responsibility is to it's customers, 2nd to it's employees and finally 3rd to it's shareholders.

Um, no. At least in Texas, the directors, officers, and employees owe fiduciary duties to the company (shareholders). The company owes nothing to the customers and employees outside of any contractual duties they assume and the general legal duties like ordinary care and non-discrimination. I assume it's the same in most other states.

(More than usual, this is not legal advice.

Re:Poor poor AIG - didn't go bankrupt.... (1)

khallow (566160) | about a year and a half ago | (#42520413)

A companies first and foremost responsibility is to it's customers, 2nd to it's employees and finally 3rd to it's shareholders.

This bears repeating. Bankruptcy solves this problem as much as anything can. Perhaps due to the systemic risk of so many institutions failing at once, there should have been some sort of action to provide liquidity or whatever. But that could have been done on the cheap while the company was going through bankruptcy. Instead, they turned a crisis into a milk run, transferring wealth from the public to the people who caused the crisis.

For fucks sake (5, Insightful)

Hatta (162192) | about a year and a half ago | (#42519821)

Will someone put these motherfuckers against the wall and shoot them already?

Re:For fucks sake (2)

betterunixthanunix (980855) | about a year and a half ago | (#42519885)

We don't need to do that; we still have laws, and we can still pass laws that rein in corporations. Not that the Democrats or Republicans are likely to do such a thing.

Now, if after passing such laws, the corporations continue their abuses, then we can talk about armed revolts.

Re:For fucks sake (4, Funny)

Rogerborg (306625) | about a year and a half ago | (#42519949)

The problem isn't corporations, it's lawyers. You don't fix that by paying another bunch of lawyers. That just enriches twice as many lawyers. That's how they breed.

I recommend fire, and lots of it.

Re:For fucks sake (5, Funny)

Anonymous Coward | about a year and a half ago | (#42519989)

The Lawyer class comes with an immunity to fire - something about their origins being described in a novel by Dante.

Re:For fucks sake (0)

Anonymous Coward | about a year and a half ago | (#42519953)

I wouldn't expect much help from the Libertarians, either.

Re:For fucks sake (1)

Osiris Ani (230116) | about a year and a half ago | (#42520065)

We don't need to do that; we still have laws, and we can still pass laws that rein in corporations.

That would be useful if we could pass laws and enforce them retroactively. However, Article 1 of our Constitution forbids ex post facto laws, so that's a problem.

Re:For fucks sake (2)

spire3661 (1038968) | about a year and a half ago | (#42520231)

That doesnt stop them from piling on punishments ex post facto to people convicted of sexual crimes.

Re:For fucks sake (1)

Samantha Wright (1324923) | about a year and a half ago | (#42520073)

You still have laws, you say? Oh yes, better call up those lobbyists.

Re:For fucks sake (5, Interesting)

Hatta (162192) | about a year and a half ago | (#42520279)

We may have laws, but we have no rule of law. The 2008 financial crisis is proof of that. We already have the laws we need to put these people away, Reagan imprisoned nearly 1000 bankers for much less egregious crimes during the S&L crisis. Fraud is illegal, perjury is illegal, and running a business that profits from such activity is illegal.

No, this is not a problem with our laws. It's a problem with our government being incapable of enforcing the law against the powerful. Vigilante justice is the only solution. Put a few bullets through a few CEOs and they'll be begging to see federal court instead.

Re:For fucks sake (-1)

Anonymous Coward | about a year and a half ago | (#42519993)

I've said this elsewhere, but I wish Osama was a lot more targeted in his attacks. We wouldn't be trillions of dollars in the hole nor have worldwide economic recession had he killed these fuckers.

Modded to trollblivion (0)

Anonymous Coward | about a year and a half ago | (#42520321)

Will someone put these motherfuckers against the wall and shoot them already?

Hitler tried, but we stopped him.

Re:Modded to trollblivion (0)

Anonymous Coward | about a year and a half ago | (#42520571)

It's been 70 years and it's still too soon...

Re:For fucks sake (1)

godrik (1287354) | about a year and a half ago | (#42520461)

In which election can I vote for you? Seriously, that type of crap needs to stop.

Re:For fucks sake (1)

Tablizer (95088) | about a year and a half ago | (#42520533)

Can't, the gov't just banned fire-arms

The US Governement can respond (4, Interesting)

Anonymous Coward | about a year and a half ago | (#42519823)

AIG was a risky investment. Anyone who would have invested in AIG at that time would expect a return that balanced that risk - that includes the taxpayers.

Figures (0)

Anonymous Coward | about a year and a half ago | (#42519829)

Pigs coming back for seconds. Should have let their stocks become worthless.

News for Nerds (-1)

Anonymous Coward | about a year and a half ago | (#42519833)

Stuff that matters!

Well... (5, Interesting)

fuzzyfuzzyfungus (1223518) | about a year and a half ago | (#42519839)

In rough numbers, it looks like brass scrap is going for about $2.33/lb. Given the big brass balls that AIG apparently possesses, they should never have needed any sort of bailout in the first place...

(And, incidentally, if that 14% interest rate was so crushingly unfair, where exactly were the private lenders willing to offer better rates and cut big, bad, Uncle Sam out of the picture?)

Re:Well... (2)

thoth (7907) | about a year and a half ago | (#42520331)

(And, incidentally, if that 14% interest rate was so crushingly unfair, where exactly were the private lenders willing to offer better rates and cut big, bad, Uncle Sam out of the picture?)

No kidding. Looks like Wall Street can't live under the rules it expects everybody else to sacrifice everything in the name of their profits for. I wish our government would have given them the middle finger and told them to find private investors to bail them out.

This whole noise about a lawsuit has to be some negotiating gimmick to lower the interest rate. As in, give them a refund on money already paid back.

Screw them, time to initiate fraud lawsuits instead. Then their objections would suddenly vanish.

Re:Well... (5, Insightful)

fuzzyfuzzyfungus (1223518) | about a year and a half ago | (#42520473)

There is certainly a case to be made that the AIG bailout was structured in no small part for the benefit of AIG's counterparties(for reasons that, um, have absolutely nothing to do with the fact that Goldman Sachs was one of the big ones, and the thing was essentially written by GS staff temporarily working for the feds); but it takes serious chutzpah to complain about an interest rate lower than the one on a consumer credit card when your situation was so fucked up that nobody would touch your corpse with somebody else's ten foot pole during one of the most dramatic capital-market fuckups in the history of capital markets...

Re: Well... (2)

mabhatter654 (561290) | about a year and a half ago | (#42520641)

This is CAPITALISM at its finest. Somebody needs money... You get whatever you want out of them short of sexual favors...

Capitalism isn't about FAIR dealing, it's about POWER. The Feds had the money, the banks had to take the money because their numbers fell down. Just like a customer takes a payday loan at 309% APR so they don't get their car repo'd right this minute. (And yes, the big banks own all those companies if you follow the money trail)

So no hard feelings. Ok.

Re:Well... (1)

girlintraining (1395911) | about a year and a half ago | (#42520483)

...where exactly were the private lenders willing to offer better rates and cut big, bad, Uncle Sam out of the picture?)

Er, AIG would typically be that private lender. You may recall that many banks and smaller firms went out of business due to the financial crisis, and a whole lot of illegal activity happened as they tried to stay afloat -- most recently in the news was how millions were foreclosed upon and even more threatened with foreclosure. Many billions have been shelled out by over a dozen major banks over this... though frankly, many billions more should have been fined against them since they're still coming out ahead.

Uncle Sam stepped in to prevent a domino effect; The entire market would have imploded and taken a significant chunk of the economy with it... or at least that was the rationale behind the bailouts. Whether that's true or not I'm not qualified to say. But if you agree with that rationale, then Uncle Sam really was the only party capable of stepping in and stabilizing the situation; All the other lenders AIG could have leaned on were also over-extended at the time. Liquidity in the markets was practically zero... There was no wiggle room.

Re:Well... (4, Insightful)

fuzzyfuzzyfungus (1223518) | about a year and a half ago | (#42520639)

That's my point: If you want to argue that 14% is some sort of cruel usury, step up and show me the better offer... *Crickets*.

Given the state of the capital markets, and the fact that the 'insurance' that was supposed to have negated a whole bunch of risk was suddenly being offered by a company that had no money, 14% was a gift. Had there been something better on the table, from another party, and Uncle Sam made it clear that 14% was an offer you couldn't refuse, you might have a case. As it was, though...

Good for them.... (2, Interesting)

pollarda (632730) | about a year and a half ago | (#42519895)

I hope they win their lawsuit. If only the shareholders and bond holders of GM would do the same. What a massive money laundering scheme.

UAW supports Obama
Obama takes over most of GM shares screwing the bond holders (mostly retirement funds) in the process
Obama gives most shares to the UAW
UAW waits six months and sells the shares

Each of these steps were covered in the regular media but, for some reason I have yet to see an article putting all the steps together. If you think this is an anti-Obama thing it isn't as it would be equally as terrible if a Republican did it.

Re:Good for them.... (1)

the eric conspiracy (20178) | about a year and a half ago | (#42520037)

Except it was W who bailed out AIG.

Re:Good for them.... (1)

pollarda (632730) | about a year and a half ago | (#42520081)

As I said, it is equally as bad if a Republican does it as a Democrat. If the government wants shares in a company, they should buy the shares from the shareholders at current market rate. Even at that, it is doubtful whether taxpayer funds should be used to purchase shares in public companies (in effect nationalizing them.)

Re:Good for them.... (1)

Anonymous Coward | about a year and a half ago | (#42520059)

You forget this is Slashdot. It would be infinitely worse if a conservative did it and is quite all right if a social democrat does it.

Re:Good for them.... (3, Insightful)

afidel (530433) | about a year and a half ago | (#42520089)

Employees always come before creditors in bankruptcy, even "secured" creditors.

Re:Good for them.... (3, Insightful)

Rockoon (1252108) | about a year and a half ago | (#42520129)

If you think this is an anti-Obama thing it isn't as it would be equally as terrible if a Republican did it.

I wish the Republicans did it.. that way there would be a legion of people complaining about it today.

Instead, the Democrats did it. Lets see what the legion has to say now.

Re:Good for them.... (0)

Anonymous Coward | about a year and a half ago | (#42520269)

Just because it'd be equally as terrible if a Republican did it does not mean it's not an anti-Obama thing. I think the better question to ask yourself is if *INSERT POLITICAL GROUP YOU AGREE WITH HERE* did it, would you have jumped through as many hoops to make a comment that's tangentially related at best?

Re:Good for them.... (3, Insightful)

khallow (566160) | about a year and a half ago | (#42520603)

I think this sort of reasoning should be standard fare for political debate. If your attitude on a political or ethical activity or behavior changes based on the identity of who did it, then there's something fundamentally wrong.

The previous example is classic and describes one of the fundamental hypocrisies of politics: it's ok if the good guys do it, but not ok if the bad guys do it. Another one is the evolution of power. Too many people are willing to grant some political figure power because they like that person. They aren't willing to consider what happens when that political figure is no longer in power and another less appealing figure comes in.

As I see it, I want a government stable enough that it doesn't fall apart the moment an extreme faction gets in power. You want something that can survive a neo-nazi, fundamentalist (of any religious flavor), voluntary human extinctionist head of state, or whatever crazy ideology is out there. And frankly, I think the US has such a system. It's survived (so far) both G. W. Bush and Obama, for example, and that's probably as extreme a difference in ideology as you're likely to get.

First bite the hand that feeds you... (1)

gestalt_n_pepper (991155) | about a year and a half ago | (#42519901)

And then settle in for a nice long chew. What undoubtedly happened is that the bailout interfered with some upper management pig's hedge fund investment and he didn't make the millions in profits he was expecting when the company finally failed.

Interesting implication. To bother with the lawsuit, they must be planning a repeat performance, and don't want their bets interfered with this time.

Re:First bite the hand that feeds you... (2)

Rogerborg (306625) | about a year and a half ago | (#42520027)

More like the scorpion and the frog. Except in this version, the scorpion lets the frog carry it safely to the other side of the river and then goes into a stinging frenzy. Evolution took care of the really dumb ones, I guess.

Can the citizens file a class action? (3, Interesting)

bradley13 (1118935) | about a year and a half ago | (#42519917)

I have an even better idea: Let's get the entire population of US citizens to file a suit against the government, and all the politicians individually, for wasting our money bailing out failing companies.

Re:Can the citizens file a class action? (5, Insightful)

the eric conspiracy (20178) | about a year and a half ago | (#42519999)

The thing is though that it wasn't a waste of money. We got a stinking big profit out of it.

Not only that but we saved a metric fuckton of money on things like pension insurance, deposit insurance and unemployment benefits that we would have had to pay out if they had gone tits up.

Re:Can the citizens file a class action? (0)

operagost (62405) | about a year and a half ago | (#42520131)

We made money on AIG, but lost it on nearly everyone else to the tune of $63 billion.
Please explain to me how I, a citizen, am on the hook for the pension claims of a corporation? And guess what? We are essentially paying for permanent unemployment compensation for everyone who ever loses his job, anyway. We just extended them for the THIRD time! The last time gave people 99 WEEKS of benefits; God knows what it's up to now, being that the media doesn't report anything.

Re:Can the citizens file a class action? (1)

pwnyxpress (2597273) | about a year and a half ago | (#42520201)

Are you talking about these profits [politifact.com] that were reduced at the end to about 5 million after tax reductions?

Re:Can the citizens file a class action? (3, Insightful)

bill_mcgonigle (4333) | about a year and a half ago | (#42520215)

The thing is though that it wasn't a waste of money. We got a stinking big profit out of it.

That's "The Seen". What else didn't happen because all that money was diverted to AIG? That money doesn't come out of thin air - it's either taxed or inflated. If taxed, people don't have the money to spend directly. If inflated, people are paying more for everything and (in a constant-level-salary environment) decrease their spending elsewhere.

How many, e.g., dance studios, went under because families had to cut back on extras because their grocery bill went up by 50%? These diffuse long-tail effects are what Bastiat termed "the Unseen" [econlib.org] and are always ignored by politicians because the People let them get away with that.

Re:Can the citizens file a class action? (0)

Anonymous Coward | about a year and a half ago | (#42520107)

Where do I sign up?

Re:Can the citizens file a class action? (1)

Osiris Ani (230116) | about a year and a half ago | (#42520181)

Let's get the entire population of US citizens to file a suit against the government, and all the politicians individually, for wasting our money bailing out failing companies.

That would be something, if the US government hadn't earned a profit of $22.7 billion on the AIG bailout. If I recall correctly, that's part of the substance of AIG's complaint that's being discussed here.

Funny business (5, Interesting)

tnk1 (899206) | about a year and a half ago | (#42519923)

Now, I wasn't in favor of the bailouts to begin with. I'm generally in favor of deregulation, and the only way that deregulated businesses learn their lesson is to be allowed to crash and burn on their own. These guys should have paid the price for their failure to understand how to do business so that the stockholders and the boards would understand in the future that they cannot allow bozos to run their businesses.

However, AIG stockholders are still in the wrong here, despite the forced bailout. How can you say you might have made more money when your other option was collapse? It's clear that the interest rate was very high, but it was well within AIG's ability to pay it (obviously). And now, those stockholders are trying to double down. No way.

Of course, this case seems so absurd on the face of it, that I must be missing something. I'm probably going to see what the details are, but at this point, it is looking like funny business.

Re:Funny business (0)

Anonymous Coward | about a year and a half ago | (#42520467)

"despite the forced bailout"

It wasn't a forced bailout. The board of directors voted to accept it and the terms of repayment.

Re:Funny business (0)

Rockoon (1252108) | about a year and a half ago | (#42520477)

...despite the forced bailout. How can you say you might have made more money when your other option was collapse?

Having an option implies choice. You've already admitted that they were forced. So stop pretending that there were other options.

Share holders were denied a free market conclusion to the issue, which yes may have meant that they themselves lost their shirts, but also may have meant that anyone that held onto the shares would be better off today. The whole "it could have been worse" argument is a fallacy, as it both wasn't allowed to be worse and also wasn't allowed to be better.

..and on top of it, it was done with public money.

Re:Funny business (3, Insightful)

daem0n1x (748565) | about a year and a half ago | (#42520513)

These guys should have paid the price for their failure to understand how to do business so that the stockholders and the boards would understand in the future that they cannot allow bozos to run their businesses.

It never worked before. Why should it work now? There's an economic bubble busting roughly every ten years. The more deregulation, the bigger the bubbles and the bigger the bust.

People are too greedy to learn the lesson. They'll be cautious for a while and then forget it after a few years. Only state regulations can rein in all that greed and stupidity. Provided the State is owned by The People, and not in the hands of a few privileged that sway it in their own interest.

Re:Funny business (1)

MysteriousPreacher (702266) | about a year and a half ago | (#42520601)

Kind of depends on what you mean by deregulation; it's an incredible vague term. Also, deregulation and allowing businesses to fail would not mutually exclusive. I'm inclined to favour some regulation and oversight of businesses (and markets) who, by virtue of their size, would cause severe economic issues if they were to collapse.

To argue otherwise is like saying that it's fine to let people perform DIY structural alterations of their houses, as they'll learn not to do it if they accidentally knock down a supporting wall. The problem is that people will keep making these dumb mistakes, and they'll affect others. Look at the bullshit in Ireland where people and banks were up to their ears in debt, that was doing just fine if we assumed that property prices would never stop rising. This increase also relied upon the idea that they could just keep building properties and that residents would automagically pop out of nowhere.

This shit is difficult to manage, and risks popular protest. No-one wants to be the finance minister who's the reason why the roller coaster ride to riches slows, but those people don't seem to realise that roller coasters go down as well as up. The market is dumber and more greedy than any individual person or business. The greed is good because it builds wealth, but it's bad when all caution is thrown to the wind. A friend applied for a car loan, to buy a Mondeo for 6 grand or so. The bank tried to talk him up to borrowing 20 grand, which at the time would have been about two thirds of his annual salary being used to buy an asset that was guaranteed to deprecate in value. The monthly payments alone would have been nearly as much as he paid in rent, and then the running costs on top would have been crippling. The bank knew how much he was earning, and should have realised that.
He was sensible - he just borrowed what he'd already planned for. Others weren't as sensible, and banks were happy to funnel insane amounts of unsecured credit in to the market. With mortgages, the loans were secured, but based on the incredibly over-valued property. I stayed out of the property market, and I'm reasonably well secured financially. I'm still paying the consequences of these fuck-ups. I'm not entirely blameless - I could have complained to my elected representatives. I could have asked them to stop sleeping at the wheel. Chances are it'd have done little, but still it's something I should have done. Quite a few of us joked about the silly house prices, yet very few people actually tried to do something. That's why we need regulation. While it may slow growth, if done right it would lessen the possibility of these insane booms and crashes that we seem doomed to repeat ad infinitum.

Seems better to try to prevent collapses to begin with than trying to prevent the next collapse through a harsh lesson. Depending on the size of the market or business, the harsh lesson can be pretty indiscriminate. Another thing that should be done is to avoid accelerating issues through misguided attempts at governmental meddling. Making mortgages available to people who should never have qualified in the first place certainly didn't help. Reckless lending for the purposes of social engineering is risky as hell.

Dear AIG (4, Insightful)

Ralph Spoilsport (673134) | about a year and a half ago | (#42519945)

Fuck You, you greedy parasitic assholes.

Gratitude. (0)

Anonymous Coward | about a year and a half ago | (#42519947)

It gets in the way of corporate policy.

Pump and dump scheme. (1)

140Mandak262Jamuna (970587) | about a year and a half ago | (#42519963)

I would not put anything beyond the messed up court system when it comes to lawsuits asking for billions of dollars in damages. But it smells more like a pump and dump scheme. People must have purchased lots of AIG stock quietly over the last two years. There will be a media flurry. A few shills will mention the law suits has merits. That is the pumping. A few wealthy but gullible investors, mostly trust fund babies who think they are competent to manage their trust funds themselves, will be induced buy this stock. That will be the dumping. Then who knows what happens in the courts?

Boies Again? (1)

fuzznutz (789413) | about a year and a half ago | (#42519979)

The lawyer representing him is none other than David Boies of SCO fame."

How does this guy keep finding work? His track record seems iffy since his last "big" win against Microsoft.

Re:Boies Again? (0)

Anonymous Coward | about a year and a half ago | (#42520213)

The California gay community would beg to differ.

Devil is in the details (3, Interesting)

PPH (736903) | about a year and a half ago | (#42520003)

The AIG (and other) bailouts were not typical bankruptcy cases. These are initiated by creditors when the debtor can't meet obligations. The government's role (the courts) is only to oversee the terms of the reorganization/liquidation. With AIG, the court case will probably depend on who and how AIG was found to be illiquid (or under capitalized), and how the exchange of equity for a capital injection was requested. If AIG's board of directors came looking for help, the government may not be guilty of taking private property. If the BoD negotiated that deal, it was their prerogative to do so, or they are the ones shareholders should be suing (good luck with that).

One could claim that AIG management was pressured into taking the deal. But much of that pressure came from other private investment banks to keep the AIG paper they held from becoming worthless. The Lehman Brothers bankruptcy may stand as evidence of the government offering the option of allowing investment banking to solve its own problems without intervention.

Don't forget that AIG was Goldman's victim here. (0)

Anonymous Coward | about a year and a half ago | (#42520033)

1. AIG got into their desperate situation because got tricked by Goldman Sachs into buying bad loans. (Just like Greece, and many others.)
2. The government guy who "handled" the AIG bailout, was Lloid Blankfein's closest friend and ex-colleage.
3. That guy immediately had a meeting with Blankfein after AIG announced their problems, to decide what to do. (Imagine your biggest competitor conspiring with the government on fucking you over.)
4. So Goldman Sachs massively profited from this failed assassination attempt. And the government was in on it.

So yeah. They got a really fuckin' good reason to sue the government!

IMO, that shit is treason, among other massively evil business practices. And Blankfein and his pals belong to prison.

Bunch of UNGRATEFUL BASTARDS (0)

Anonymous Coward | about a year and a half ago | (#42520063)

They destroy the economy and then when we bail them out they want to sue US THE PEOPLE the very ones that bailed them out. As far as im concerned if they need help again "F" them and LET THEM FAIL AND GO UNDER, BUNCH OF UNGRATEFUL BASTARDS.

"Too Big To Fail" (3, Interesting)

Tablizer (95088) | about a year and a half ago | (#42520069)

Banks are key infrastructure, almost like electricity and water. Our economy depends on them running smoothly. Thus, we have to treat them as a protected resource, not just some random widget maker.

One could also argue the same for the auto industry in the north east because the economy in that region was heavily dependent on a few companies. Part of the problem is that we allowed oligopolies to form such that failure is almost all or nothing: too big a granularity of change.

Oligopolies are a problem because they create "too big to fail". If there were a dozen or so car companies, then a couple of them failing wouldn't cause the same devastation.

Oligopolies often argue that they need "economy of scale" to be efficient, but that's usually just an excuse. Sub-system specialists could provide economy of scale for specific portions of cars, and perhaps facilitate more standardization.

Re:"Too Big To Fail" (2)

bill_mcgonigle (4333) | about a year and a half ago | (#42520363)

Oligopolies are a problem because they create "too big to fail". If there were a dozen or so car companies, then a couple of them failing wouldn't cause the same devastation.

The nature of permanent corporate charters and a regulatory environment that prevents competition makes this nearly impossible to achieve. We've seen how well the "political-favorites and subsidies" model works for the economy. Yet, many are still convinced it's the right model, despite all evidence to the contrary. :sigh:

14%? (1)

geoffrobinson (109879) | about a year and a half ago | (#42520075)

14% in a 1% environment does seem like a high interest rate. Instead of a loan, assuming we had to help which I don't, the government should have taken an equity stake like it did with GM.

Re:14%? (1)

TheDarAve (513675) | about a year and a half ago | (#42520223)

It did actually. The 14% is the amount the preferred stock appreciated in value between the original purchase and the final payoff.

Re:14%? (0)

Anonymous Coward | about a year and a half ago | (#42520277)

plenty of companies that charge +30% for a quick loan to buy new tv etc. Those who get those loans cannot get them at a decent rate at a bank, are high risk ( or really dumb) , The government lending large amounts of money to a company on the brink of bankrupcy seems to be similar situation so 14% doesn't seem to bad

Complaining about 14% interest rate (1)

Anonymous Coward | about a year and a half ago | (#42520115)

So they are complaining about the 14% interest rate. Wow, when the shoe's on the other foot, suddenly it's pretty shitty to get subprime rates, huh.

Bailout conditions (1)

mbone (558574) | about a year and a half ago | (#42520117)

If I were in charge of the bailout process, the first step in any bailout would be to fire the entire management team, without exceptions. Anyone with truly unique knowledge of the company's processes could be hired as a short term consultant. Modern American management tends to be both incompetent and convinced of their irreplaceability; if they wreck a company, they need to be shown the door.

Also, anything too big to fail should be nationalized and broken up and then the pieces sold on the market (e.g., by an IPO).

Yes, this would tend to hurt the old shareholders. Guess what? Their company went broke. If it is liquidated, the shareholders are last in line to share in the assets and will typically get nothing.

Typical (0)

Anonymous Coward | about a year and a half ago | (#42520155)

Just typical,

Give us the cash and not the expense.

Oh, I do not like having to pay 14% but I will allow those Pay Day Loans, Credit Cards, etc., to charge 25% or more interest and then tack on Service Fees for a total cost of 110% or greater in total percentage cost.

It would be nice if the US could smarten up and requre AIG to pay the full costs the Government needed to defend the American Citizen and Tax Payer specifically.

In the end the US Citizens will be on the hook for this. Else there is something that is happening in Congress we are not supposed to see.

Shareholders (0)

Anonymous Coward | about a year and a half ago | (#42520157)

If you gave two shits about your shareholders, you wouldn't have gotten into the kind of trouble that you did.

Sue the financial industry ... (1)

gstoddart (321705) | about a year and a half ago | (#42520203)

Can the whole world sue the financial industry for the mess they made by taking worthless debt and shuffling it around so that it looked like AAA stuff? You know, all of those worthless mortgages and "Asset Backed Paper Commodity" shit they made to look valuable and pawned off on everybody else?

Because if these guys hadn't skimmed everything off the top, and diluted things which had read value, the whole financial melt-down would have never have happened.

Most people's investments haven't recovered, so how about we hold AIG culpable for part of that?

The fallout from the stupid behavior of all of these international bankers fucked us all ... and now we have lawsuits about shareholder profit from the bailout? Asshats.

What they REALLY expected... (5, Interesting)

TheDarAve (513675) | about a year and a half ago | (#42520205)

When AIG took on the deal, their stock price was crap. They expected that once they took the deal, which was the USG buying preferred stock, which pays dividends, that the stock price would fall and stay LOWER than the buy price until the USG's stocks were bought off from payment via dividends and cash buyback. This turned out NOT to be the case and the stock price went ABOVE what the USG bought it for. What AIG is crying about, is the fact that they had to buy back their OWN STOCK from the USG, which they had an option NOT TO TAKE, at the current market rate which was, surprise surprise, HIGHER than when it sold it to the USG. There's nothing to sue over here. It was a standard loan backed by the only asset that AIG had at the time: its own stock. No "property" was bought by the government, and the government's voting rights were limited by the wording of the purchase, even though it should have had a ridiculous amount of power with that large of a percentage of *PREFERRED STOCKS*.

Fuck AIG (0)

Anonymous Coward | about a year and a half ago | (#42520227)

I was pissed off from day one that AIG got any bailout at all. I watched these people try (and luckily fail) to pull every dirty trick they could on a friend who had a legitimate workman's comp claim.

The guy, litterally, had a saw blade go through the knuckle on his index finger, half way through the middle of his hand. Doctors were telling him that he was not going to be able to go back to that kind of work and would need to be retrained for something else... this wasn't some guy with phantom "back pain". It wasn't that he completely couldn't work...he tried to see if he could even go back part time, and it didn't work, his hand just couldn't take it.

It seemed like every other month they would kick him off the program and make him go to court to get back on. Then, when he is desperate and hasn't seen a check in a few weeks, and has to choose between working illegally and risking injuring himself worst....or not feeding his kids.... hard to feed a family pan handling, or living off friends and family for weeks at a time while the courts sort it all out.... thats when they start sending PIs around to document everything.
(he got so frustrated he approached one of them and confirmed as best one can, he said the guy paniced and pretended he was looking for someone else)

So in short....fuck AIG. I can understand trying to find fraud, but trying to make people desperate enough to break the rules so you can catch them? That left a real sour taste in my mouth about them.

No Good Deed Goes Unpunished (0)

Anonymous Coward | about a year and a half ago | (#42520229)

The irony is that Paulson really pushed through the AIG bailout to save his buddies at Goldman Sachs, who otherwise probably would have gone down the tubes (and they got bailed out at 100 cents on the dollar, courtesy of the AIG bailout). If he had done the reponsible (and legal thing) AIG would have been separated into two companies; a "good" regulated company that had adequate reserves, and a "bad" company that was selling credit default swaps it couldn't honor. If that course had been taken, Goldman Sachs, Citibank, and probably a few others would have gone down the tubes, but it would have been bankers taking the haircuts instead of taxpayers.Remember: Paulson ran Goldman Sachs before he became Treasury Secretary.

Alternative (0)

Anonymous Coward | about a year and a half ago | (#42520243)

Don't take the money, and use the alternative.... Bankruptcy court, which is explicitly designed for companies that can't pay their bills / meet their commitments

After which, the "Shareholders" would be left with how much?
So don't complain, Uncle Sam bailed you out and charged you for it, I'd suggest the interest charged is far too low, and the offer shouldn't have been made.
Unreasonable? How? Don't accept the deal, and use the alternatives...
Oh wait, nobody else would bail it out, since it was so *ed? Back to Bankruptcy court, which does have the ability to expedite things...

class action sloptrough (1)

DynamoJoe (879038) | about a year and a half ago | (#42520245)

I expect the settlement (whatever the end value is) to be 90% cash to the plaintiff attorneys and 10% to be distributed to the plaintiffs in the form of AIG stock.

Just Compensation (1)

Ignacio (1465) | about a year and a half ago | (#42520283)

What, pulling your collecting asses out of the fire in the first place isn't "just compensation"?

14% is onerous? (0)

Anonymous Coward | about a year and a half ago | (#42520295)

If they really think 14% is onerous, then I look forward to their support for laws against usury, and their principled moral stance against credit cards and the pay-day loan industry.

I won't be holding my breath.

$!0 says there's will be some accidental (1)

future assassin (639396) | about a year and a half ago | (#42520299)

misshaps coming down on the AIG higher up and the lawyers?

Let me be the one to say... (4, Insightful)

macwhizkid (864124) | about a year and a half ago | (#42520317)

What a bunch of ungrateful bastards.

AIG's stock had fallen 95% in a matter of months and the company was days away from bankruptcy. If 14 percent interest was so damn high, why the hell didn't they make the deal with the private investors that were willing to go with a lower rate than the feds?

Oh, that's right, because there weren't any.

They should have tried a payday loan (2)

stabiesoft (733417) | about a year and a half ago | (#42520343)

if they wanted to see how bad interest rates can be for high risk borrowers. Or a title loan on your car's title. Both semi secured debt and I think these run 25 to 30% interest rate. Yeah, cry me a river AIG.

Speaking as an actual shareholder... (4, Insightful)

kaizendojo (956951) | about a year and a half ago | (#42520371)

I think their argument is full of shit. No one held a gun to their head, either when they made such piss poor decisions that got them into the mess they created or when they stood in line for the bailout. And I know that I will never see dollar one of the money they would be awarded in any lawsuit, so don't argue that you're doing this on my behalf.

Frankly, I already made my money. I bought it at the firesale for a buck a share, on the day when they were declared "too big to fail". At the moment I am writing this, those same shares are worth 35.50. AIG is just pissed off that they couldn't do the same thing, a point made by another poster here.

AIG is down with OPP (1)

w1nt3rmute (2165804) | about a year and a half ago | (#42520463)

Private equity bailouts of struggling companies about to go insolvent are much worse. As others have already stated, it's going to be pretty hard to convince a jury that "taken for public use" is what actually happened with AIG... more like an arms-length exchange between two willing (and one very motivated) counterparties.

Capitalism, meet capitalism. (0)

Anonymous Coward | about a year and a half ago | (#42520511)

Capitalism, meet capitalism.

Do they not see how completely retarded they look right now, whining about this stupid shit?

Die SCO Die! (0)

Anonymous Coward | about a year and a half ago | (#42520515)

Confirming that SCO is a vampire from hell!

My hope is (0)

Anonymous Coward | about a year and a half ago | (#42520525)

That AIG will join the suit, and then a judge will slap all their dumb asses with Rule 11 sanctions, resulting in million dollar fines. That would be such sweet justice.

AIG was a house of cards... (1)

ElitistWhiner (79961) | about a year and a half ago | (#42520651)

AIG cooked its ' deals'. Different than cooking the books. Have fun Justice!

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