American International Group Inc., the insurer rescued by the U.S. government in 2008, said Tuesday it is considering joining a lawsuit that claims the bailout terms were unfair, drawing outrage from lawmakers.
In a statement late Tuesday, AIG said it had no choice but to consider the demand from its former chief executive, Maurice “Hank” Greenberg, and his holding company Starr International that it join his lawsuit, Reuters reported. Greenberg has sued for damages over the bailout and wants AIG to join him in challenging the "exorbitant" terms of the government rescue.
AIG has been trying to put on a new face by thanking America for its bailout. But it may dash that effort by joining Greenberg.
Directors of the insurance giant, at their regular meeting Wednesday, are expected to consider joining a suit that argues the bailout — U.S. pledges totaling more than $182 billion — shortchanged the company's shareholders.
"It takes a lot of gall to say the government that bailed you out didn't pay you enough," said John C. Coffee, a Columbia Law School professor and expert on corporate governance, told the Los Angeles Times.
AIG already had a lot of work to do in rebuilding its corporate image after the company became the public example of excessive risk-taking, which nearly destroyed the global financial system.
In an advertising campaign, the company has been thanking taxpayers for the government bailout in the fall of 2008 when it teetered on the verge of bankruptcy.
AIG ended up taking about $125 billion of the pledged money in the complex, multi-step rescue by the Treasury Department and the Federal Reserve Bank of New York. It recently repaid all the funds, plus interest and dividends, and launched its ad campaign.
Still, the company was the most reviled of bailout beneficiaries not only for being the single largest rescue but also for paying hefty bonuses to the employees whose bad bets on the subprime housing market would have toppled the company had taxpayers not stepped in.
"This is like suing the paramedic who just gave you CPR because he didn't give you a pillow," said Rep. Elijah Cummings, D-Md., according to the LA Times.
"Definition of chutzpah," tweeted former Obama campaign senior strategist David Axelrod.
Sen. Elizabeth Warren, D-Mass., who gained fame heading the government's oversight panel for the $700 billion bailout fund, said: "AIG's reckless bets nearly crashed our entire economy," and it would be "outrageous" for the company to join the suit.
"AIG should thank American taxpayers for their help, not bite the hand that fed them for helping them out in a crisis," she said.
At Wednesday's board meeting, AIG directors are expected to hear presentations about the Greenberg suit, the LA Times reports.
"AIG has paid back its debt to America with a profit, and we mean it when we say thank you to the American people," AIG Chief Executive Robert Benmosche said Tuesday.
But he maintained that AIG's board "has fiduciary and legal obligations to the company and its shareholders" to consider joining the suit. The board expects to make a decision by the end of the month.
Reps. Peter Welch, D-Vt., Michael Capuano, D-Mass., and Luiz Gutierrez, D-Ill., wrote to AIG board Chairman Robert Miller on Tuesday warning him not to join the suit.
"Don't do it. Don't even think about it," they wrote. "AIG became the poster company for Wall Street greed, fiscal mismanagement and executive bonuses — the taxpayer and economy be damned. Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah."