AIG

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]

Have you ever wanted to hold a mock trial of Hank Greenberg’s lawsuit over the AIG bailout from the comfort of your own home? If so, you’re in luck, because yesterday AIG filed with a federal court the complete AIG Mock Trial Deluxe Kit. It’s all here:

  • A written protocol for conducting the mock trial
  • Briefs, reply briefs, and sur-reply briefs from Hank Greenberg’s investment vehicle Starr International, the Treasury, and the New York Fed
  • A polite letter from the Department of Justice declining the invitation to attend1
  • PowerPoint presentations of both sides2
  • A transcript of highly respected lawyers arguing both sides

The mock trial was, of course, conducted by AIG’s board a few weeks ago as part of the board’s consideration of whether to join Greenberg’s lawsuit against the government claiming that AIG’s bailout was an unconstitutional taking of shareholder property. The board, unsurprisingly, went with no, and yesterday it filed the full mock trial kit with the court hearing Greenberg’s claims.

The transcript is a very good read; I will mostly pick out a few amusing points but that shouldn’t detract from the facts that (1) there is a legitimate serious interesting issue here, beyond the “ooh look at the ingrates” surface, and (2) both sides did a good job of arguing it. David Boies, Greenberg’s lawyer, has the harder case – that the government unconstitutionally took 80% of AIG’s equity by entering into a voluntary credit agreement approved by AIG’s board that included a grant of equity – but he does a good job with it, resting his argument largely on Section 13(3) of the Federal Reserve Act (which permits the Fed to lend to non-banks but which does not on its face allow the Fed to, for instance, punitively demand lots of equity in excess of what it needs to compensate it for that lending) and on public statements by government officials to the effect of “AIG’s bailout was harsh because we wanted to make an example of them.” Read more »

There’s a lot to choose from but I’m going to say that the very best thing about AIG’s pretending it might sue the government last week, and then not doing it, is that then it actually sued the government:

American International Group Inc. filed a lawsuit against a Federal Reserve vehicle created during AIG’s bailout that held some of its troubled mortgage bonds, in a dispute over rights to sue over the bonds. … At issue is whether AIG, in selling billions of dollars in troubled mortgage bonds to the New York Fed in late 2008, transferred its rights to sue for losses it incurred on the securities.

So it’s not quite as big as the Hank Greenberg give-me-back-my-$25-billion lawsuit that AIG opted out of, but it’s pretty big; AIG thinks it has over $7 billion in damages against Bank of America/Countrywide alone. If it’s right, either AIG or the Fed should be entitled to about $7bn of BofA’s cash. So call this 1/4 as big as joining the Greenberg suit, though considerably less than 1/4 as offensive.

One way to resolve this dispute amicably might be to conclude that both AIG and the Fed should be entitled to $7bn of BofA’s cash. After all, who decided that only one investor gets to sue BofA per mortgage? We’ve talked before about the fact that BofA’s liability for Countrywide mortgages does not seem to be limited by the amount of mortgages that Countrywide wrote; several lawsuits now cover overlapping pools of mortgages. How much BofA ends up paying for those mortgages will depend on political and PR factors, on the existence of embarrassing emails, on technicalities of contract drafting and legal doctrines, and on how much money BofA, y’know, has, but it seems unlikely that it will depend on some sort of one-mortgage-one-lawsuit principle. You write enough bad mortgages and you give up your expectations of tidiness. Read more »

Remember yesterday when AIG was going to sue the government for bailing it out? Hahaha yeah that was never going to happen, and today it didn’t:

American International Group Inc.’s directors decided Wednesday not to participate in a lawsuit that accuses the U.S. government of taking advantage of the company in its rescue from the financial crisis. … “The AIG Board has determined to refuse Starr’s demand in its entirety, and will neither pursue these claims itself nor permit Starr to pursue them in AIG’s name,” the company said in a release. …

Mindful of the potential backlash, a number of AIG directors entered Wednesday’s meeting leaning toward rejecting Starr’s request to join its suit, two people familiar with their thinking said

YOU THINK?

If you read as much of the Internet as I do, you probably noticed that a lot of people yesterday freaked the fuck out over the pseudo-fact that AIG was considering joining the lawsuit, brought by its ex-CEO Hank Greenberg and his investment company Starr International, against the U.S. government for basically being too mean in bailing out AIG. Some of these people were regulators, Senators, and Congressmen, three of whom penned this cheery missive to AIG: Read more »

Is AIG going to sue the government for bailing it out? Hahaha no of course not, come on, that would be nuts. So what is this?

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.”

I say unto you that this meeting is not for “consider[ing] joining” that lawsuit, which is one part of former AIG CEO Hank Greenberg’s so-far-not-particularly-successful campaign to get his $25 billion back from the government. (This part, in the Court of Federal Claims, is still going, unlike the part in a New York federal court that was dismissed.) Rather, it is for humoring Hank Greenberg, and the way you humor people who have lots of high-priced lawyers is by giving their high-priced lawyers a chance to talk to other high-priced lawyers for a long time, with PowerPoint. This paragraph in AIG’s court filing is less “we may join the suit” and more “see Hank we are listening to you really carefully and care deeply about what you have to say now, please, go on, this is a safe space”: Read more »

  • 11 Dec 2012 at 5:47 PM

AIG’s Remaining Bailout Reduced To Rounding Error

A while back I built a spreadsheet to do math about AIG, and it took me a long time and led to basically one short post with what I still think was a rather lovely blobby picture, so I’m just going to shamelessly reuse that spreadsheet with slight updates and be all OOH LOOK AN IRR:

So yeah: as the AIG bailout saga comes to its sort-of conclusion, we can sort of conclude that the government made a 5.6% return on its money. Assumptions etc. in the original post; the accounting profit ties out reasonably well, if you squint, with the Treasury’s official math.

Herewith some random observations and questions on AIG:1 Read more »

Robert Benmosche: We Showed This World A Thing Or Two

“Dear Colleagues,” Robert Benmosche wrote in a memo to AIG employees today. “We come together as a company to celebrate in good times and we draw together in times of shared crisis. Today warrants a celebration like no other in AIG’s history and places well in the past a crisis none of us will ever forget…Today the US Department of the Treasury has priced an offering of approximately 234.2 million shares of AIG common stock at a price to market of $32.50 per share. Upon the closing of this transaction, expected this Friday, Treasury will have sold the last of its remaining shares of AIG common stock, receiving proceeds of approximately $7.6 billion from the sale. The closing of this transaction will mark the full resolution of America’s financial support of AIG…It is one of the most extraordinary – and what many believed to be the most unlikely– turnarounds in American business history. And you did it…You did this. Every single man and woman at AIG did this remarkable thing. There is a saying in American life, there are no second acts. Well, take a bow, because today marks our second act.” [Dealbook]