Potential AIG Lawsuit - Bad PR and Shareholder Rights
Good morning monkeys,
Yesterday the NY Times reported that AIG will be hearing a shareholder presentation, led by former CEO Hank Greenberg, stating they should join an ongoing lawsuit against the Federal Government, concerning the terms of the AIG bailout.
First, lets remember that AIG is simply doing fulfilling a corporate responsibility by hearing this briefing, but obviously even the thought of this makes people squeamish (especially for me and my fellow monkeys living in DC).
On the surface, it seems that AIG is upset they got the raw end of the deal (pretty amazing to think Geithner and co, in the middle of all this madness, were able to make a PROFITABLE deal for the Federal Government. Don't see something like that every day). They were on the brink of collapse, and took the only deal that was available to them at the time.
However, Greenberg does have valid complaints. Could AIG have survived by simply offering cheap, quick settlements for all the shit credit default swaps they took on? Wouldn't borrowers have settled and eventually, as any insurance company does, AIG would have bounced back. Was the deal made by Geithner and co not to the benefit of AIG shareholders, but to certain unnamed banks who were basically relayed money by AIG middlemen? These are some valid concerns for shareholders and should be explored further.
My take: AIG should have been thinking of their shareholders AT ALL TIMES, including on the brink of their demise. I understand some shareholders frustration, but this seems to me like some morning after regret. Whatever decision the board tries to make today (which I think will be to not join the lawsuit), this is only excellent public relations timing following their new TV ads. One positive that could come out of this is we start to take a closer look at how Paulson, Geither, Bernanke, and co justified the varying terms and bailouts made during 2007-2008.
Alright guys, just wanted to see what the groups feeling were on this interesting topic of shareholder rights and government intervention.
If the deal was so bad, they could have just said no at the time. You can't agree to a deal to save the company, and then once you are good to go and the gov't pulls out sue them because you thought it was 'unfair.' That is an absolute joke. No one forced AIG to let the government become a shareholder. Both parties involved agreed to a deal. That should be the end of it.
And that's not even considering the AWFUL PR for the financial services industry if AIG does this. A lot of people already have negative perceptions of this industry; AIG would undo what little positive perception is left if they actually pull this stunt.
I'm with you though: the perception is really bad, even if it's just legal formalities (AIG isn't going to sue). The pundits are having a field day with this already. Haters.
My take on it is that no one held a gun to AIG and said take the deal. They had a choice in the matter. They could have tried to settle their payments themselves, they could take the government deal, or they could become insolvent. They chose to take the deal and they agreed to the terms, regardless of whether they like the deal now or not.
I really hope AIG chooses to not sue, otherwise it could be very, very bad PR. In addition to the mess it will cause for them on Capital Hill...
This is incredibly out of touch even with AIG's own message at the moment. Has anyone seen all those commercials where AIG employees thank "us" for the bailout? I know Greenberg doesn't work there anymore, but damn,what terrible timing.
I think this is it...
...this is the death of human dignity.
To be clear, the fact that the AIG bailout was used in part as a backdoor bailout to the TBTF banks is a complete disgrace. But, that does not give AIG a right to sue. They have literally no option but to take the bailout or fail. There was no other way out. The TBTF banks that were funneled money through AIG knew this and used this knowledge as leverage to get more out of the deal.
AIG did not get a raw deal. They got a deal that saved the company and no one from AIG has paid any real consequences for what they did. AIG's Financial Products group can arguably be viewed as the trigger man for the financial crisis. Their CDS products enabled the insane growth of the CDO machine and made for a complete disaster when it came time to pay up for their side of the contracts. They literally ran the business with the mentality that they could mint money without thinking about the consequences that were only a few years away. It isn't only that they didn't see the potential downsides of their actions (they did), but that they actively ignored the downsides in order to maximize short-term profit, enriching scumbags like Joe Cassano at the long-term expense of the taxpayer and credibility of the financial system.
Perhaps Mr. Greenberg's presentation was put together by The Onion.
Cliff notes for Matt Levine
On a side note, there will probably be a hard core faction that always believes that AIG's share value decline is the gov'ts fault and if nothing else they play an amusing, if not annoying, devil's advocate. It's kind of interesting to watch from sidelines.
Quo quo dolorem illum perferendis rerum est iure. Nihil aliquid quis eveniet et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...