Tuesday, January 8, 2013
Fresh from launching a branding campaign to try to rechristen itself as a paragon of patriotism, the giant insurer American International Group is reportedly weighing a step that would remind America just why everyone got so darn mad in the first place.
The board of AIG, according to the New York Times, is weighing whether to join a $25 billion lawsuit against the U.S. government for forcing unacceptably high losses on shareholders in its bailout. The argument is that this violated the Fifth Amendment’s prohibition on the government seizing private property without just compensation.
To anyone who closely followed the events of September 2008, when AIG was bailed out, this theory seems patently ridiculous. Here’s a refresher on what happened. The company’s financial products division had been, in effect, selling guarantees against losses on highly rated securities tied to mortgages. When those securities plummeted in value, the losses in that division were so great that it brought one of the world’s biggest financial firms to the brink of bankruptcy. When AIG executives turned to the government for help on Sept. 16, 2008, the day after Lehman Brothers went bankrupt, they had no other options; no private entity would lend them money.