As American International Group Inc. weighs whether to join a lawsuit against the government that spent $182 billion to save it from collapse, U.S. lawmakers have a message for the insurance behemoth: “Don’t even think about it.”
In a letter to AIG Chairman Robert Miller, U.S. Reps. Peter Welch, D-Vt., and Michael Capuano, D-Mass., characterized the insurer as the “poster child” for Wall Street greed, fiscal mismanagement and executive bonuses.
“Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah,” the letter read. “Taxpayers are still furious that they rescued a company whose own conduct brought it down. Don’t rub salt in the wounds with yet another reckless decision that is on par with the reckless decision that led to the bailout in the first place.”
The mere fact that AIG was considering a lawsuit drew disbelief from economic officials. "We should counter-sue for stupidity," former U.S. Labor Secretary Robert Reich tweeted.
In widely reported comments, former inspector general for the financial industry bailout Neil Barofsky said AIG joining the suit would be a "giant middle finger" to the American taxpayer.
AIG said Tuesday its board of directors will weigh whether to take part in a shareholder lawsuit against the U.S. over the government's $182 billion bailout of the insurer.
If AIG decides to join the complaint, which seeks $25 billion in damages, it would pit the company against the government that rescued it in 2008 from collapsing under the weight of huge losses on mortgage-backed securities and other toxic assets.
AIG said that its directors will take up the matter on Wednesday and expects they will have a decision by the end of the month.
Congresswoman Maxine Waters, D-Calif., said it was “simply outrageous” that AIG officials would even consider such a lawsuit.
“This is even more troubling given that it comes on the heels of a public relations campaign, the purpose of which is supposed to ‘thank’ the American taxpayer for saving the firm. I would urge the board to drop its consideration of the lawsuit, thank the American public for the $182 billion rescue package that prevented the company’s collapse, and support the reforms in the Dodd–Frank Wall Street Reform and Consumer Protection Act that ensure that systemically important financial institutions can no longer hold our economy hostage.”
Sen. Elizabeth Warren, D-Mass., also criticized the news, saying that AIG should thank American taxpayers rather than "bite the hand that fed them” in 2008.
"Beginning in 2008, the federal government poured billions of dollars into AIG to save it from bankruptcy,” Warren said in a statement. “AIG’s reckless bets nearly crashed our entire economy. Taxpayers across this country saved AIG from ruin, and it would be outrageous for this company to turn around and sue the federal government because they think the deal wasn’t generous enough. Even today, the government provides an ongoing, stealth bailout, propping up AIG with special tax breaks — tax breaks that Congress should stop. AIG should thank American taxpayers for their help, not bite the hand that fed them for helping them out in a crisis."
Starr International Co. Inc., the investment firm of former AIG CEO Maurice Greenberg, filed the lawsuit in November 2011 on behalf of the firm and AIG shareholders.
The complaint, filed in the U.S. Court of Federal Claims and the U.S. District Court for the Southern District of New York, asserts that the government didn't provide shareholders fair compensation when it took a nearly 80 percent stake in the insurer as part of its bailout. As a result, the government violated the Constitution, Starr claims.
AIG said that, by law, its board must consider three options: take over the lawsuit and pursue the claims on its own; attempt to prevent the claims from being pursued by Starr; or allow Starr to continue to pursue the complaint on AIG's behalf.
The insurer noted that, should it elect not to let Starr pursue its claims on the company's behalf, Starr would likely challenge the move. In such a scenario, should Starr prevail in the case, AIG would not receive any damages or portion of a potential settlement.
The Court of Federal Claims denied a request by the U.S. to dismiss the lawsuit, which means the case will go forward regardless of AIG's participation.
The government came to the rescue of AIG in September 2008, at the depths of the financial meltdown. The New York company did business with hundreds of firms around the world, and officials feared its collapse would wreck the financial system.
All told, AIG's bailout was the largest of the Wall Street rescue packages.
Since the financial meltdown, AIG has undergone a significant restructuring which has cut the size of the company nearly in half aimed at focusing on its core insurance operations.
In 2010, the company spun off Asian life insurer AIA Group in Hong Kong's biggest ever initial public offering to raise $20 billion, which was used to pay bailout debt.
In November, AIG reported a third-quarter profit of nearly $2 billion thanks to strength in its insurance operations and investment returns. In the same period a year earlier it lost $4 billion.
The Treasury Department announced last month that it sold all of its remaining shares of AIG, ending up with $22.7 billion more than it funneled to the company during the height of the financial crisis.
Shares of AIG ended regular trading down 28 cents at $35.65. Over the last 12 months, however, the stock is up more than 50 percent.
The Associated Press contributed to this report.