It was a close call.
American International Group (AIG) announced Wednesday it would not join a lawsuit against the federal government over the federal bailout that saved the company from economic collapse.
That the insurance giant even considered it for a moment was, as a former boyfriend of mine used to say, “a kiss and a slap.”
At the peak of the financial crisis in 2008, the government took a 92 percent stake in the company as part of the bailout. AIG paid back all the money with interest, which netted the government a profit of $22.7 billion, and recently had been running a “Thank You, America” ad campaign, presumably to show its gratitude to the American public for pulling its keister from the fire.
Even Jon Stewart of Comedy Central’s “The Daily Show” was incredulous in taking the company to task:
“So the guy who used to run insurance giant AIG is mad, because when his company was hit by a calamity they clearly weren’t prepared for, the group that stepped in to provide funds for them that they desperately needed assessed the company and thought, well, they’ve engaged in a history of risky behaviors and had a pre-existing condition called ‘the money’s all gone-orrhea,’ and so they charged them a higher rate for the money that they needed, almost to the point of taking over the company, profiting from their misfortune, if you will,” Stewart said. “Did that upset you, AIG? Because it’s also known as your business model.”
All joking aside, the issue couldn’t have come at a worse time for AIG.
Just as the ad campaign was launched to give the public the feeling that maybe, just maybe, some of the big banks and insurers that were bailed out when they were on the brink of collapse had come to realize how good they got it, AIG said it would consider joining the lawsuit brought by its former chief executive officer.
In the suit, originally filed in 2011 seeking $25 billion, Maurice “Hank” Greenberg, who is still a major shareholder, claimed the $182 billion bailout was a bad deal for AIG shareholders whose earnings potential was diminished. A judge rejected that argument, but Greenberg and the other plaintiffs in the case have appealed.
Attorneys for the plaintiffs made a presentation to the AIG board Wednesday morning, followed by attorneys for the defendants, the New York Federal Reserve and the Treasury Department.
The government sold the remainder of its stake in AIG after the loan was repaid.
According to The Associated Press, however, AIG was legally obligated to consider joining the lawsuit, which Greenberg had pursued in the company’s name.
Columbia University law professor John Coffee told Marketplace that the AIG directors could have been looking to head off the possibility that Greenberg would sue the company because it would not sue the federal government.
“In considering and ultimately refusing the demand before us, the board of directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders,” AIG said in a statement.
The mere suggestion that AIG might join the lawsuit, however, struck a nerve with the public. Rep. Peter Welch (D-Vermont) and two other House Democrats, according to the AP, sent the company a memo that said in effect: “Don’t even think about it.”
“It’s not acceptable socially for AIG to take the money and go back and sue the government. A deal is a deal,” AIG chief executive Robert Benmosche told CNBC.
That doesn’t exactly sound as if Benmosche thought the lawsuit was a bad idea, just that joining it likely would be more trouble from a public relations standpoint than it was worth.
It wouldn’t be the first time AIG displayed a tin ear on public perception.
The firm spent $440,000 on a spa retreat for its executives and paid millions of dollars in bonuses to its executives, just days after receiving the federal bailout.
So AIG just dodged another bullet. One wonders, though, how long their luck will hold out.
Jackie Jones, a journalist and journalism educator, is director of the career transformation firm Jones Coaching LLC and author of “Taking Care of the Business of You: 7 Days to Getting Your Career on Track.”
