Robert Benmosche is still putting the finishing touches on his commencement address of hope. Read more »
Insurer American International Group Inc has asked a court to block Maurice “Hank” Greenberg’s efforts to sue the U.S. government on AIG’s behalf, saying its former CEO has not proven he should have the right to do so. Earlier this year, AIG drew sharp criticism from members of Congress and an outraged public when the firm considered the possibility of joining Greenberg’s lawsuit, which challenges the terms of the insurer’s $182.3 billion bailout by the federal government in 2008. AIG said Greenberg had forced its hand in even deliberating the prospect, but that ultimately it did not want to sue anyway amid a public backlash. Absent AIG’s participation, Greenberg is pursuing a derivative claim, seeking to sue the U.S. government on AIG’s behalf over the terms of the $182.3 billion rescue. Greenberg and his company Starr International, which owned 12 percent of AIG before the rescue, are also suing the government directly.
A while back Bear Stearns sold some mortgage-backed securities to a thing called FSAM, which was basically a subsidiary of Franco-Belgian monstrosité Dexia, and FSAM sold the RMBS on to Dexia, and the mortgages were all terrible, and their value dropped, and Dexia sued JPMorgan, currently the proud owner of Bear Stearns, and today JPMorgan won:
JPMorgan Chase & Co has won the dismissal of the vast majority of a lawsuit accusing it of misleading the Belgian-French bank Dexia SA into buying more than $1.6 billion of troubled mortgage debt.
The decision, made public Wednesday by U.S. District Judge Jed Rakoff in Manhattan, is a victory for the largest U.S. bank, in a case that gained notoriety after emails and other materials were disclosed that suggested the bank and its affiliates knew the debt was toxic, but sold it anyway.
Despite the notoriety this is kind of a boring case: it’s a garden-variety RMBS fraud case; Bear said various things in the offering documents that maybe weren’t so true, and the market crashed and the investors lost a lot of money, and now they’re mad. There’s like a zillion of those cases; actually there’s like a zillion of those cases just against Bear Stearns (here are two).
But the fact that the bank won is pretty interesting? Like, if JPMorgan can win a garden-variety RMBS case then so can anyone? I guess? So I suppose it’s worth spending a minute figuring out what this means for other banks.
We run into immediate problems because it’s hard to know exactly why JPMorgan won; the judge’s order is two pages of “opinion to follow.” But reading JPMorgan’s submissions you can get behind CNBC’s interpretation: Read more »
Hank Greenberg: still at it! My lord. Remember when AIG was going to sue the government along with him, and everyone freaked out, and then it didn’t, and everyone was all “whew, glad that’s over”? Hahaha yeah. Not over.
Greenberg filed his amended complaint in his lawsuit against the government today, and in addition to sort of doubling down on his damages claim,1 he makes a whole lot of hay out of the fact that when he asked AIG to join his lawsuit, people made fun of him. Also I guess some other stuff:
The Government also threatened the AIG Board with the purpose and effect of intimidating AIG and its directors into acting to halt this litigation. The United States indicated it would wage a negative public relations campaign against AIG and its directors, terminate any cooperative relationship with AIG, and heavily scrutinize AIG’s SEC, tax, and other filings from the 2008 to 2010 period when Defendant controlled AIG.
Government officials mounted a campaign, including in the days immediately preceding the Board meeting to consider Plaintiff’s demand, to intimidate the AIG Board that condemned the AIG Board for even considering, much less accepting, the demand. …
As a result of the various factors that had compromised the independence and due care of the demand process, the AIG Board did not take the several weeks it had stated to this Court it would take to make a considered decision following the presentations to it on January 9, 2013, but rather rejected the demand the same day, less than three hours after those presentations ended. The AIG Board had in fact made its decision to reject Starr’s demand even before the presentations were made.
We talked about this when it happened, and I pointed out that this stuff matters.2 Greenberg is mostly – not entirely but mostly – suing on behalf of AIG. In particular, the extra $32 billion that he found in the lawsuit’s couch cushions this time around is entirely AIG’s claim: the shareholders never had that money; the company did. Read more »
Maurice “Hank” Greenberg, the former American International Group chief executive, has more than doubled the size of his class-action lawsuit against the United States over the insurer’s bailout to roughly $55.5 billion from $25 billion. In an amended complaint filed late Monday in the U.S. Court of Federal Claims, Greenberg’s Starr International Co said it is now seeking damages over Maiden Lane III LLC, a vehicle designed to rid banks of toxic debt underlying transactions with AIG. The claims are in addition to claims that Starr previously asserted over the government’s taking of a 79.9 percent stake in AIG in September 2008, which was eventually swapped for 562.9 million common shares. In the amended complaint, Starr said it is seeking to recover, on behalf of shareholders and the company, $23 billion over the government’s 79.9 percent stake, plus as much as $32.5 billion of collateral it said was given away through Maiden Lane III. It is also seeking unspecified damages related to AIG’s 1-for-20 reverse stock split in June 2009. [Reuters]
AIG is in the news today for two very small numbers in connection with much larger numbers. First: AIG is no longer bailed out! I know, you thought that happened like six months ago, and then again three months ago, but today AIG got rid of the last little bits of government ownership, really this time:
American International Group, Inc. (NYSE: AIG) announced today that it completed the repurchase of warrants issued to the United States Department of the Treasury (U.S. Treasury) in 2008 and 2009. … AIG and the U.S. Treasury agreed upon a repurchase price of approximately $25 million for the warrants. The U.S. Treasury does not have any residual interest in AIG after AIG’s repurchase of these warrants.
“With AIG repurchasing all outstanding warrants issued to the U.S. Treasury, we are turning the final page on America’s assistance to AIG,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “We appreciate the opportunities this support allowed and are proud to have returned to America every cent plus a profit of $22.7 billion.”
Back in December, I speculated baselessly about why AIG didn’t just buy back these warrants in connection with Treasury’s final sale of stock back in December, since they were just rounding error on the $7.6bn offering. I figured waiting would let the government get a better deal, and it seems to have: I ballparked a value of $18,000,000.393 for those warrants in December, so Treasury made an extra $7mm by waiting three months.1 One possible explanation is that AIG and Treasury enjoyed the dynamic of announcing “AIG HAS PAID OFF ITS BAILOUT” every three months, so they milked it for all it was worth. I’m sure someone from Treasury left a pen or something at AIG’s offices, and its return will be announced with great fanfare in a few months.
The Greenberg of The AIG Story is a cross between Henry Ford, Henry Kissinger and James Bond. When some ski gondolas come loose on a Vermont mountain that he later turns into “one of America’s leading resorts”, he skis down “to warn others and prevent injuries.” When he flies to Vietnam after a hotel fire in Ho Chi Minh City “the victims and their families [are] moved by Greenberg’s presence”. He selects where to put the ashes of Cornelius Vander Starr, the founder of AIG, and builds an 18-hole golf course at his mentor’s country house “in response to requests from guests.” He is barred from AIG’s headquarters, and denied access to personal material including letters from his mother “and medical files for his dog, Snowball”. [FT]