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AIG Has Every Right & Responsibility To Sue The US For Excessive Interest Payments On It's Bailout! That's Right, I Said It!!!

Reggie Middleton's picture




 

 

Maurice Greenberg, the ousted CEO, Chairman, and founder of AIG who remains a major investor in the company, filed suit in 2011 on behalf of fellow shareholders against the government. He has urged A.I.G. to enjoin which should pressure the government into settlement talks - that is if the powers that be don't start distending the law.NY Times Dealbooklooks at it this way:

Should Mr. Greenberg snare a major settlement without A.I.G., the company could face additional lawsuits from other shareholders. Suing the government would not only placate the 87-year-old former chief, but would put A.I.G. in line for a potential payout.

Yet such a move would almost certainly be widely seen as an audacious display of ingratitude. The action would also threaten to inflame tensions in Washington, where the company has become a byword for excessive risk-taking on Wall Street.

Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people, who spoke on the condition of anonymity, noted that without the bailout, A.I.G. shareholders would have fared far worse in bankruptcy.

“On the one hand, from a corporate governance perspective, it appears they’re being extra cautious and careful,” said Frank Partnoy, a former banker who is now a professor of law and finance at the University of San Diego School of Law. “On the other hand, it’s a slap in the face to the taxpayer and the government.”

AIG has every right and responsibility to sue the US for excessive interest payments on it's bailout! Yes, the company failed in execution. Yes, the company would have went bust if the government didn't rescue it. But that is besides the point. If the government wanted market forces to reign supreme they would have let AIG collapse. The fact is they didn't. The reason is because the government was bailing out the banks, namely the most politically connected publicly traded entity in the entire world. The Vampire Squid! Goldman Sachs! As excerpted from theNY Times:

At the end of the American International Group’s annual meeting last month, a shareholder approached the microphone with a question for Robert Benmosche, the insurer’s chief executive. “I’d like to know, what does A.I.G. plan to do with Goldman Sachs?” he asked. “Are you going to get — recoup — some of our money that was given to them?

As a condition of AIG's bailout, the government "insisted" on paying Goldman et. al. 100 cents on the dollar of its CDS written with AIG, something that wouldn't have been necessary if Goldman had prudently underwritten counterparty and credit risks that it was taking. Apparently, the US government believes that it didn't. In addition, it's somethng that wouldn't have been possible if the government didn't intervene on behalf of the banks, forcing the AIG shareholders to take a hit, but shielding the Goldman, et. al. shareholders. As my grandma used to tell me, what's good for the goose is good for the gander! It's not as if these credit/counterparty risks were invisible, I saw them as far back as early 2008 - referenceI won't say I told you so, again. This page also happened to of shown the credit risk concentration of every bank granted a reprieve by the government after the fact. As a matter of fact, there's still more than a modicum of risk present, as clearly illustrated in...

 

Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?

Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?

Welcome to part two of my series on Hunting the Squid, the overvaluation and under-appreciation of the risks that is Goldman Sachs. Since this highly analytical, but poignant diatribe covers a lot of material, it's imperative that those who have not done so review part 1 of this series, I'm Hunting Big Game Today:The Squid On The Spear Tip, Part...

Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!  

Hunting the Squid, part 4: So, What Else Can Go Wrong With Goldman Sachs? Plenty!

Yes, this more of the hardest hitting investment banking research available focusing on Goldman Sachs (the Squid), but before you go on, be sure you have read parts 1.2. and 3:  I'm Hunting Big Game Today:The Squid On A Spear Tip, Part 1 & Introduction Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To...

 

 

Now, AIG's shareholders are being forced to finance the bailout of Goldman Sachs. To not combat that should open AIG management up to shareholder lawsuits, for they are not acting as a fiduciary of the shareholder capital if they let this slide. It's one thing to pay for the AIG bailout, but its another to pay for the Goldman bailout. In addition, this forced bailout that refused to force AIG creditors not to take haircuts runs counter to the ideology the government used when it forced the Chrysler's creditor's to take massive haircuts.

When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société GénéraleDeutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.

But after the Securities and Exchange Commission’s civil fraud suit filed in April against Goldman for possibly misrepresenting a mortgage deal to investors, A.I.G. executives and shareholders are asking whether A.I.G. may have been misled by Goldman into insuring mortgage deals that the bank and others may have known were flawed.

The anger here should be directed at Goldman, et. al., and not AIG. AIG's management is doing its job, something that our government officials failed to do in making Goldman, et. al. whole during the bailout. Can anyone sayregulatory capture?Goldman et. al.'s transgressions against its clients and counterparties in terms of misrepresentation and what appears to this lay person as outright fraud have been downright egregious, as clearly articulated in Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over Clients, it's just that this time, the US taxpayer AND the AIG shareholders are the "Muppets"! The Abacus deal was particularly atrocious, Paulson, Abacus and Goldman Sachs Lawsuit. How about Morgan Stanley's CRE deals on behalf of their so-called clients? Wall Street Real Estate Funds Lose Between 61% to 98% for Their Investors as They Rake in Fees!

re_fund_returns.png

 

If Goldman, et. al. were allowed to swim solely at the mercy of the free markets, it (they) would be sinking, Goldman Sachs Latest: Vindicates BoomBustBlog Research ...

... documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2009 when it forced Chrysler’s lenders to take losses when the government bailed out the auto giant.

Regulatory capture! Banks simply lobby harder and pay more to the government than auto companies. How many auto company execs are embedded in government leadership seats worldwide?

As a Congressional commission convenes hearings Wednesday exploring the A.I.G. bailout and Goldman’s relationship with the insurer, analysts say that the documents suggest that regulators were overly punitive toward A.I.G. and overly forgiving of banks during the bailout — signified, they say, by the fact that the legal waiver undermined A.I.G. and its shareholders’ ability to recover damages.

“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”

“This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said.

Nahh? It's called the Federal Reserve Bank, not the Federal Reserve Insurer, nor the Federal Reserve Taxpayer! Who the hell do you think they will back in a crunch?

About $46 billion of the taxpayer money in the A.I.G. bailout was used to pay to mortgage trading partners like Goldman and Société Générale, a French bank, to make good on their claims. The banks are not expected to return any of that money, leading the Congressional Research Service to say in March that much of the taxpayer money ultimately bailed out the banks, not A.I.G.

Of which the interest of about 50% of which should be refunded to AIG shareholders. Without the AIG bailout, these banks would have recieved ZILCH, NOTHING, NADA, Bull Sh1t!

 

 

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Fri, 01/11/2013 - 23:44 | 3146434 moneymutt
moneymutt's picture

Okay, if a parks and rec guy saved my life from falling over a cliff,, because a rich guy paid him to save me because I owed the rich guy a lot of money and had good future potential earnings, and the guy that saved me broke my in process of saving me,...and then I sued the govt employee who saved me for my medical bills....you could say that is okay and govt employee shouldnt be mad at me but at rich guy behind all...but come on, you don't sue the guy that saved your life...sure exposé the rich guy b not his faithful servant who did, indeed, save your life

Fri, 01/11/2013 - 23:43 | 3146433 moneymutt
moneymutt's picture

Okay, if a parks and rec guy saved my life from falling over a cliff,, because a rich guy paid him to save me because I owed the rich guy a lot of money and had good future potential earnings, and the guy that saved me broke my in process of saving me,...and then I sued the govt employee who saved me for my medical bills....you could say that is okay and govt employee shouldnt be mad at me but at rich guy behind all...but come on, you don't sue the guy that saved your life...sure exposé the rich guy b not his faithful servant who did, indeed, save your life

Fri, 01/11/2013 - 05:51 | 3143635 Jeelan
Jeelan's picture

In addition, this forced bailout that refused to force AIG creditors not to take haircuts runs counter to the ideology the government used when it forced the Chrysler's creditor's to take massive haircuts.

paper writing
Wed, 01/09/2013 - 15:21 | 3137535 exartizo
exartizo's picture

What's really pitiful and sad is that THERE WOULD BE NO AIG WITHOUT THE GOVERNMENT.

Wed, 01/09/2013 - 14:49 | 3137336 highwaytoserfdom
highwaytoserfdom's picture

“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”

 

Penn's motto is based on a line from Horace's III.24 (Book 3, Ode 24), quid leges sine moribus vanae proficiunt? ("of what avail empty laws without [good] morals ...

 

Laws without character are worthless. Reggie I find myself swimming in the sewer with the sh1t..   while all the time convincing myself we are in a moral society..... 

Wed, 01/09/2013 - 14:40 | 3137248 Peter Pan
Peter Pan's picture

Perhaps the government secretly welcomes this law suit as it woud give them the means to give AIG more funds with which perhaps it needs to cover some new losses we are not told about.

Wed, 01/09/2013 - 14:15 | 3137154 Son of Loki
Son of Loki's picture

Open your wallets, taxpayers...here they come again.

Wed, 01/09/2013 - 13:39 | 3137009 q99x2
q99x2's picture

Arrest Hank Greengberg.

Wed, 01/09/2013 - 13:52 | 3137049 Michaelwiseguy
Michaelwiseguy's picture

Larry Silverstein sued and got a double billions payout in a terrorist insurance claim on the WTC, even though the federal government, Israel, and Mossad did 9/11. I don't see why AIG shouldn't get a big payday too.

Wed, 01/09/2013 - 13:31 | 3136968 tradewithdave
tradewithdave's picture

Reggie would be currect assuming that you operate under the rule of law.  In that case, sign me up as a plaintiff for the class action lawsuit against all congressional earnings achieved through insider trading.  Otherwise, just find a 90 year old judge who will say that the reason why I can't sue them is because it's taken the CFTC too long to conduct their investigation as the basis for dismissal of the case. 

www.tradewithdave.com

Wed, 01/09/2013 - 13:09 | 3136881 WallowaMountainMan
WallowaMountainMan's picture

utter and complete nonsense.

you're saying that because aig corporate life was only saved and did not get to rob the rest of us as badly as gs and the other evil ones did, that aig has legal recourse to rob us now.

utter and complete nonsense.

but i hope aig sues. the discovery process would make for a great show. i'd love to get all those documents out in the open. then the depositions....

but, not to be.

just my guess.

Wed, 01/09/2013 - 13:21 | 3136921 Snakeeyes
Snakeeyes's picture

I was on Fox Business last night with Gerri Willis. The guest before me (Liz McDonald) was ranting about AIG lawsuit. And they kept mentioning Hank Greenberg.

When it came to my segment on mortgage foreclosure settlement, the creep Bruce Marks from NACA kept calling me "Hank." I finally called him Karl (as in Karl Marks). The guy kept trying to talk over me the entire time.

http://confoundedinterest.wordpress.com/2013/01/09/mortgage-purchase-and...

Long and short. AIG should have been encourage to go through an organized bankruptcy. Period. 

Wed, 01/09/2013 - 13:02 | 3136854 donsluck
donsluck's picture

People, stop whining. You are all correct, but there is nothing anyone on this board can do to change what is. The only thing you can do is search for profits in the situation you are presented with.

Wed, 01/09/2013 - 12:40 | 3136771 TrustWho
TrustWho's picture

I love this law suit. Let the powerful point fingers at each other and maybe some truth will emerge.

Wed, 01/09/2013 - 14:55 | 3137380 NotApplicable
NotApplicable's picture

Let's see here... First GS was made whole with money from Uncle Sugar in order to save AIG, and now, I'm betting that AIG will be made whole with money from Uncle Sugar.

All I'm seeing is a fleecing of dollar holders by two highly-connected criminal elements. There's absolutely no way any good can come of this.

Wed, 01/09/2013 - 12:25 | 3136696 dogbreath
dogbreath's picture

Why does the fed want to hold the mortgages on millions of american homes, they'll only end up owning them in the event of a real big crash.  Does this make sense?

 

Wed, 01/09/2013 - 13:01 | 3136851 OneTinSoldier66
OneTinSoldier66's picture

+1

 

If you had the printing press, would it make sense then? I think it's the only time that it would make sense. It doesn't make sense to you or me because we don't have the printing press.

Wed, 01/09/2013 - 13:35 | 3136983 tradewithdave
tradewithdave's picture

If you were planning to divide the currency into two separate components 1) for the double coincidence of needs and 2) one for the accumulation of wealth, so that you can have deflation and inflation at the same time, what would you want to own? 

Wed, 01/09/2013 - 13:34 | 3136973 Bindar Dundat
Bindar Dundat's picture

Only if you want to own all the houses so that before 2016 you can offer free stuff to the 47%.

It is hard to beat free stuff when it comes to getting votes.  I love this Country!

Wed, 01/09/2013 - 12:19 | 3136668 Urban Roman
Urban Roman's picture

To all AIG employees, directors, and hangers-on: 

 

Dear Sir or Madam, 

Clean out your office by this afternoon.

The last one out, please turn off the lights. 

Sincerely, 

 The Taxpayer.

Wed, 01/09/2013 - 15:12 | 3137483 Urban Roman
Urban Roman's picture

Yeah, I know, it wasn't even a good troll. 

Long pitchforks, rope, and lamp posts. 

Wed, 01/09/2013 - 11:46 | 3136549 judejin
judejin's picture

it is a lawless world.  the bankers wrote the laws and appointed the judges.

it is pathetic!

Wed, 01/09/2013 - 11:41 | 3136525 williambanzai7
williambanzai7's picture

The company was a corpse. Full stop.

Technically, Greenberg should have gotten zippo and Goldman pennies on the dollar if anything at all.

Now the creature from the bailout lagoon is returning.

Wed, 01/09/2013 - 11:49 | 3136558 Reggie Middleton
Reggie Middleton's picture

True enough, but if Goldman wasn't bailed, that Lehman thing would have reverbrated through the big banks. Do you really think any of these banks actually have the capital to back any of their exposure, sans these faux CDS (& associated sh1t) hedges? Again, reference 

Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?

Wed, 01/09/2013 - 14:50 | 3137349 NotApplicable
NotApplicable's picture

"Lehman thing." Wait, wasn't that a takedown by GS in the first place by cutting off all credit to them?

 

Wed, 01/09/2013 - 12:46 | 3136795 OneTinSoldier66
OneTinSoldier66's picture

"True enough, but if Goldman wasn't bailed, that Lehman thing would have reverbrated through the big banks. Do you really think any of these banks actually have the capital to back any of their exposure, sans these faux CDS (& associated sh1t) hedges?"

 

Serious question:

 

When it comes to letting things that should fail actually fail, are you afraid of dominoes?

Wed, 01/09/2013 - 12:59 | 3136835 Mrmojorisin515
Mrmojorisin515's picture

No, but Reggie is exceptionally smart, and all exceptionally smart people know its better to make money in an evil system then to be the whipping boy.  So the same morals the system feeds on continue the perpetual motion machine.

Wed, 01/09/2013 - 12:02 | 3136611 Winston Churchill
Winston Churchill's picture

Reggie,

Don't forget the NYFed also made the AIG CDS nonrecourse as a condition of the bailout.

They knew damn well there were no real assets to deliver to AIG in exchange.

The lawsuits would have destroyed all the merchant banks in the Ponzi

scheme that they made of securitiztion. That makes the NYFed a co conspiritor

before , or after the fact.

AIG has a lot of leverage if they care to apply it.

Wed, 01/09/2013 - 12:23 | 3136687 cocoablini
cocoablini's picture

Exactly-systemic risk was destroying the banking system-with Goldman pulling a Rothchilds and betting on both ends. They needed to collect to cover, and since the finance system is running every modern government the government used taxpayer money to save itself.

When everyone is running to cash,bonds from an exploded 500 trillion dollar derivatives position that's what we call a HUGE CRASH.

Wed, 01/09/2013 - 11:55 | 3136584 LawsofPhysics
LawsofPhysics's picture

Of course not, yet there they stand.  And look at those stocks in the financial sector.  The empire is naked, there are no "markets", yet nothing changes.

Wed, 01/09/2013 - 11:49 | 3136557 DOT
DOT's picture

A corpse, stimulated back to life, now threatens to destroy its maker............

Seems familiar.

Wed, 01/09/2013 - 11:33 | 3136470 Water Is Wet
Water Is Wet's picture

"Yes, the company failed in execution. Yes, the company would have went bust if the government didn't rescue it. But that is besides the point."

No it's not.

Wed, 01/09/2013 - 11:44 | 3136537 DOT
DOT's picture

If the Government wats to pick winners and losers, then the government can explain to the court why they are not responsible for a self -serving deal that still carries a stench.

Wed, 01/09/2013 - 11:41 | 3136520 Reggie Middleton
Reggie Middleton's picture

No it's not.

Yes, it is! You are apparently advocating the US government picking winners and losers in the (used to be) free markets. In a way, your right, AIG shouldn't be suing the government to recoup GS, et. al. dollars, the government should be trying to recoup them directly! 

Wed, 01/09/2013 - 14:12 | 3137146 steelhead23
steelhead23's picture

This whole affair hinges on the decision by Timothy Geithner to repay AIG counterparties 100 cents on the dollar, then saddling AIG shareholders with the bill.  But wasn't AIG complicit in this action?  Did Geithner become the CEO through the bailout?  While I would agree that AIG shareholders may have been injured by the action, I am not quite ready to grant AIG itself a pass.  I would bet a week's pay that Treasury has pressed AIG to stay out of the shareholder lawsuit because if they come in, perhaps they could shed light on precisely why the payouts were 100% - even in the face of obvious fraud.  Frankly, on the grand scale of equitable treatment, I think the shareholders should get bupkis, but I too would like to see AIG join in, simply for the spectacle.  Discovery would be a ton of fun.

Wed, 01/09/2013 - 12:01 | 3136602 HardwoodAg
HardwoodAg's picture

Exactly! The whole issue of put-backs had been shoveled under the carpet long enough.

Wed, 01/09/2013 - 12:18 | 3136672 cocoablini
cocoablini's picture

Well, Goldman asslicker Tim Geithner came up with the 100 cents on the dollar plan.

Hank Paulson and the FED had all the banks at gunpoint(even Wells Fargo who initially refused bailout money but had to take the money so Shittybank and Goldman and JP didn't look special).

The proper thing to do would be to let the banks fail, break them up and sell parts to functioning banks-but the amount of systemic risk spread with derivatives and synthetics forced the government to half nationalize them. AIG was nationalized, let's face it. They were taken over as Reggie pointed out, to provide taxpayer assistance to an INVESTMENT BANK CALLED GOLDMAN SACHS which as nothing to do with FDIC insurance. Investment houses should have burned-but Paulson and Geithner coverted Goldman to an insured bank. The R Corruptive system was on it's knees and we stupidly saved it...

Wed, 01/09/2013 - 12:42 | 3136770 OneTinSoldier66
OneTinSoldier66's picture

I do not believe that Wells Fargo had to take the money. If you are the CEO and you actually have some morals and principles that you refuse to compromise, then you say...

 

"No, I will resign before I take your filthy rotten corrupt ill-gotten money."

 

You could certainly be more diplomatic about it if you want, but I hope you get the idea.

Wed, 01/09/2013 - 14:53 | 3137364 hidingfromhelis
hidingfromhelis's picture

Sounds good in theory, but not being a team player is the quickest way to get Egan Jones-ed.

Wed, 01/09/2013 - 14:46 | 3137317 NotApplicable
NotApplicable's picture

What's morals have to do with loyal CEOs? You either support the corrupt system, or else.

 

Wed, 01/09/2013 - 13:30 | 3136961 whotookmyalias
whotookmyalias's picture

LOL.  Let's keep electing the same fools and allow the Fed to continue with it's money printing.  It's all good.

Wed, 01/09/2013 - 11:51 | 3136568 LawsofPhysics
LawsofPhysics's picture

Shit, GS is the fucking government.   It's called regulatory capture.  Two corrupt heads of the same beast are going to go to kangaroo "court"?  HA!  Let them sue, it will hasten the collapse, fucking bring it!!!  Nothing changes until we see the return of real consequences for bad behavior.  At the end of the day the longer fraud remains the status quo, the more possession becomes the law.

Remind me, what product of real value do these paper-pushing motherfuckers actually produce again?  Fuck them, let them sue.

Wed, 01/09/2013 - 13:47 | 3137037 Skateboarder
Skateboarder's picture

Chop off any part of the beast, and it will grow back a new, more fucked up part. Incinerate the whole damn bitch and you might have a chance.

Consequence is a long forgotten notion. Making a quick buck > millions of years of hard-earned evolution it took to make yer ass comfy in front of a computer.

Fucking ingrates.

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