Maurice Greenberg

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 »

  • 01 Mar 2013 at 5:04 PM

AIG Is Even More Not Owned By The Government

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.

But this is a distraction from more amazing, less pleasant AIG news: Read more »

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 »

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 »

What’s good about the dismissal of Hank Greenberg’s AIG lawsuit today is that there’s all this roiling weirdness under the basic story of:

  • The government seized AIG because it was garbage,
  • AIG shareholder, ex-CEO, and general fanboy Hank Greenberg sued the government for destroying the valuable valuable value of his AIG stock, and
  • he lost.

Duh he lost! It’s AIG, it’s become a byword for financial failure. “Don’t pull an AIG,” bankers say to each other, in my lazy imagination. You don’t need to be a lawyer to know that a lawsuit claiming that the government’s bailout stole massive value from AIG shareholders was not going to work. It didn’t! The end.

But there actually was all sorts of crazy nefarious stuff going on; your sympathies may vary but I was ever-so-slightly moved by two of Greenberg’s claims: Read more »

The complaint in Hank Greenberg’s lawsuit against America is now online, and strange and entertaining in equal measures. I’m pretty sure Occupy Wall Street will be interested to hear his theory that the Constitution allows Fed bailouts of struggling financial institutions, but requires those bailouts to be much gentler than the one handed to AIG.

There is some sensible stuff here. Greenberg’s suit makes good use of the SIGTARP report finding that the government didn’t exactly conduct hard-nosed negotiations with AIG’s CDS counterparties. Instead, it bought off the assets covered by CDS at par (even though some of the counterparties might have accepted a haircut), tore up the CDS contracts, and waived any claims AIG might have against those counterparties. And the description of how the government avoided and ignored legal requirements to get a shareholder vote to authorize new shares for the government, and kind of maybe lied about it a bit in disclosure documents, is kind of interesting for shareholder-voting nerds, of whom there are about five and I am one.

But that’s all just a political smoke screen: lots of people are good and mad that the government funneled too much money through AIG to Goldman Sachs or Deutsche Bank or whatever, but pretty much zero of them think that money should have gone to Hank Greenberg instead. And lying in disclosure documents, like insider trading, isn’t a crime if the government does it.

Greenberg’s case really boils down to two claims. First is the constitutional argument that the bailout-in-exchange-for-equity was unconstitutional because “everyone else got a no strings attached bailout, so we should have gotten one too.” And “everyone” included “Libya”:

Throughout the global financial crisis, the Government allowed many domestic and foreign institutions access to the discount window. … [D]iscount window loans peaked at about $110 billion at the end of October 2008. Foreign banks borrowed approximately 70% of that amount; for example Dexia SA of Belgium borrowed about $33 billion; Dublin-based Depfa Bank, Plc, subsequently taken over by the German government, received approximately $25 billion; Bank of Scotland borrowed $11 billion; and Arab Banking Corp., 29% owned by the Libyan Central Bank at the time, received 73 different loans. Wachovia also borrowed $15 billion, and numerous investment banks were also granted access. At no time did the Federal Reserve Board require that it be given control of, or an equity stake in, these institutions. … If AIG had been given similar access to the Federal Reserve’s discount window or other sources of liquidity like these other institutions, AIG would easily have met its liquidity needs.

Well, okay. Maybe! The legal theory of “the constitution requires that anything you give to Libyans you have to give to me” is a bit untested – if true, I am planning to assert my Constitutional right to call down air strikes on my enemies (who are legion). Read more »