Amid much criticism and speculation of a major public backlash, Insurance giant American International Group (AIG) has decided it will not be joining a lawsuit against the U.S. Government after all. The suit claimed that AIG’s shareholders were unfairly hurt by the terms of the federal bailout that saved it from bankruptcy.
Lawsuit says bailout cheats AIG shareholders
Maurice “Hank” Greenberg, one-time CEO of AIG and now CEO of Starr International, filed a lawsuit in 2011 that many are characterizing as the height of ingratitude. It claims that the federal government charged high interest rates and claimed 92 percent equity stake in AIG, thus cheating the company’s stock holders.
‘Too big to fail’
At time it was collapsing in 2008, AIG was considered by the federal government to be “too big to fail,” and that its fall would create a ripple effect throughout the entire financial system, which was already fragile from the collapse of Lehman Brothers.
In 2008, AIG took $182 in bailout money from the U.S. Government to keep it solvent during a structured bankruptcy. It was the largest such loan made by the federal government to bailout a financial institution.
‘Thank You America’
The call to join the suit came just as AIG was running its “Thank You America” PR ad campaign, trying to win back public approval by showing its gratitude for the bailout loan.
AIG says it had a fiduciary obligation to consider joining the suit. If Greenberg wins his suit, it could in turn be sued for not upholding its obligation to its stockholders.
But the news that the offer to join the suit was not immediately rejected did not set well with many.
The backlash began almost immediately in the wake of the Tuesday’s news that AIG was on the fence about joining the lawsuit. Vermont Representative Peter Welch (D) said, “Don’t even think about it.”
Whether because it is the right thing to do or because it fears criticism from the public and the federal government, AIG has decided to not join the suit.
“The Board of Directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders,” said AIG chairman Robert S. “Steve” Miller. “We kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us.”
The Treasury Department announced in December that it has sold its final stake in AIG.