Rescued by a Bailout, A.I.G. May Sue Its Savior • Hacker News Board

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#91

Post by sageikosa » Tue, Jan 08, 2013, 6:08 PM UTC

tatsuke95 wrote: post #77

sageikosa wrote: post #74

Earlier quoted context omitted.

I seem to remember a number of them didn't need to take the funds, but were arm-twisted into it so that it would look like a general national problem as opposed to bailing out some well-connected (yet incompetent) cronies.

It wasn't about cronyism: they couldn't "bail out" specific, failing banks or else it would be obvious to stakeholders where the "bad" banks were. Every bank that would have received funds under these circumstances would be susceptible to a run. It was a crafty play, done against the will of the some of the banks. The industry needed an infusion of cash, and they spread it around a bunch of the biggest players.

The bad banks got to hide behind the good banks, the good banks can't possibly win under such a scenario, since they get lumped in as "the banks" by the masses that don't care about specific behavior but craft their ideas based on "industry".

Ford ticked up after not taking a handout, larger well governed banks had no such opportunity.

Deposits up to $100K (or thereabouts) were insured by the FDIC, so even under a run, the savers in the bad banks were not going to be left high and dry; and perhaps wiser about where they put their money in the future. Perhaps the Federal Government didn't want to see the FDIC invoked.

Instead, a precedent was set; bad behavior was not punished (by way of market action), and good behavior is tainted by association (via political demonizing).

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#92

Post by [deleted] » Tue, Jan 08, 2013, 9:47 PM UTC

ChuckMcM wrote: post #83

latinohere wrote: post #72

Earlier quoted context omitted.

You are being extremely disingenuous. You are equating the dead of a person with the dead of a company. By doing this you are biasing the argument in your favor because people know is bad to let people die. All in all I cannot take your argument seriously if you do stuff like that. You are apealling to emotion rather than reason.

Time to have some serious, un-edited conversation here folks. The comments around this question have been really interesting to watch. But the underlying subtext of corporations 'good' vs 'bad' and the level of seriousness it entails when they are dissolved is even more amazing. First off, on a discussion group that is pretty much focused on creating innovation through technology, the concept of corporations is prett…

[deleted]

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#93

Post by viscanti » Wed, Jan 09, 2013, 12:35 AM UTC

smsm42 wrote: post #28

damian2000 wrote: post #2

Surely the problem with their argument is that when they were bailed out they did have a choice; it was either accept the terms or go under. So if they accepted the govts terms, why should they now be allowed to argue they got ripped off.

Would you accept this reasoning for any deal? Because there are many folks now that claim banks tricked them into accepting unfair deals - even though they were perfectly free to deny these terms and reject the deal. There are many other situations where you can be offered an unfair deal and still be able to sue even if it's voluntary transaction - e.g., if you are offered to be hired and because of your race, your e…

There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) and racism. Lenders take creditworthiness into account all the time. I'd have to image destroying your company, with your only other alternative being bankruptcy, as being a valid reason for having a higher than normal interest rate. There's certainly some risk there, and there isn't anyone who was going to come along and bail out the government if their bailout money was lost by AIG.

There was a greater than 0% chance that the government would end up with 0$ (losing everything they "invested"). In order for them to agree to take on that risk, they needed a suitable interest rate in return. At the time the deal was made, comparable "junk" bonds were at or above that interest rate. It's just the return that investors want for such a risky investment. It's not at all like racism.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#94

Post by smsm42 » Wed, Jan 09, 2013, 1:19 AM UTC

icambron wrote: post #35

smsm42 wrote: post #30

Earlier quoted context omitted.

As I said in other comment, would you be willing to support this notion for any deal? E.g., if the offer is very clear and not opaque at all - say, you are in desperate need of a job, and some employer offers you a salary that is 10% lower than legal minimal wage and 20% lower that is common in your profession, and openly says this is because of your gender and race and he knows you gender and race are lazy and unpro…

> 10% lower than legal minimal wage and 20% lower that is common in your profession, and openly says this is because of your gender and race That completely breaks the comparison you're trying to draw. Paying someone less than minimum wage and paying them something different because of their gender or race are all explicitly illegal. A tough deal offered to AIG is none of those things, and it does not follow from "th…

The question whether the government actions in this case were legal or not is up to the court for decide. But if you accept the premise that some voluntary contracts can be not OK despite their being voluntary, you can not object to AIG's claim that they were wronged by saying "but it was voluntary!". You know already being voluntary is not enough - either you have to abandon this notion or you have to abandon your objections to AIG.

>>>> Legality aside, the actual advantage the US government had was that no one else wanted to loan AIG money. That's a pretty good reason to give them tough terms.

Do you always accept this premise? Say, nobody would be willing to lend you money - because of recent bankruptcy. Would it be OK for some shady outfit to offer you a 30% a day loan, and have you agree that if you don't return it all they get to beat you up at their heart's content? If you're hungry enough you may voluntarily agree, would it make you OK? Would it make it OK if you were sick and nobody would agree to treat you without upfront payment, but one establishment would agree if you promise to give them 95% of all your future income - would it be fine then? Or is it fine only when done to other people, especially ones investing in an evil corporation?

>>>> The US would just be making a sweetheart deal with AIG otherwise.

There's a lot of way between unfair deal and sweetheart deal. Most deals fall into the spectrum between them.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#95

Post by smsm42 » Wed, Jan 09, 2013, 1:24 AM UTC

viscanti wrote: post #93

smsm42 wrote: post #28

Earlier quoted context omitted.

Would you accept this reasoning for any deal? Because there are many folks now that claim banks tricked them into accepting unfair deals - even though they were perfectly free to deny these terms and reject the deal. There are many other situations where you can be offered an unfair deal and still be able to sue even if it's voluntary transaction - e.g., if you are offered to be hired and because of your race, your e…

There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) and racism. Lenders take creditworthiness into account all the time. I'd have to image destroying your company, with your only other alternative being bankruptcy, as being a valid reason for having a higher than normal interest rate. There's certainly some risk…

There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accept that some voluntary deals can be unfair.

>>>> In order for them to agree to take on that risk, they needed a suitable interest rate in return.

Of course. Nobody doubts that and nobody claims the money should have been provided for free. What is argued is the conditions were unfairly onerous. This may be pure bullshit and conditions might have been just fine, but voluntarity does not prove or disprove it, it is irrelevant once you accept, as US law does, that voluntary deals can be not OK. You can not have one without the other.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#96

Post by viscanti » Wed, Jan 09, 2013, 2:31 AM UTC

smsm42 wrote: post #95

viscanti wrote: post #93

Earlier quoted context omitted.

There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) and racism. Lenders take creditworthiness into account all the time. I'd have to image destroying your company, with your only other alternative being bankruptcy, as being a valid reason for having a higher than normal interest rate. There's certainly some risk…

There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accep…

The examples you've given for voluntary deals not being OK were for protected classes. There's no such protections for companies who have run their company into the ground and need a bailout. Agreeing to a deal, no matter how onerous the contractual requirements is perfectly legal if you're not a protected class, and AIG was not a protected class.

Even given that, a 14% interest rate and being asked to pay back contractually obligated debt don't seem to be onerous. Companies (and individuals) with poor creditworthiness are asked to do that all the time. It's certainly not a historically onerous agreement, and it's in-line with the returns investors were seeking for similarly risky investments at that time.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#97

Post by illuminate » Wed, Jan 09, 2013, 9:01 PM UTC

kahawe wrote: post #73

tatsuke95 wrote: post #66

Earlier quoted context omitted.

This is standard operating procedure on the internet: everyone who wears a suit is a parasitcal criminal. Back in reality, most banks have paid back their TARP funds, as did AIG, generating a hefty return over 3 years to the Treasury. You know what bailout is still significantly in the red? The auto industry. But we hear little about that because those guys don't work on Wall Street.

> The auto industry In all fairness, I do not remember "the auto industry" almost bringing the whole capitalistic system (and with it our Western world) close to a grinding halt, according to what we were lead to believe, in the last 5 to 10 years. And after the gang-rape that GM did over here in Germany and continues to do now, oh yes you do hear about them here. > a suit is a parasitcal criminal. From what I have s…

"In all fairness, I do not remember "the auto industry" almost bringing the whole capitalistic system (and with it our Western world) close to a grinding halt, according to what we were lead to believe, in the last 5 to 10 years"

Their finance departments were used for much more than car loans.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#98

Post by kahawe » Thu, Jan 10, 2013, 2:25 PM UTC

tatsuke95 wrote: post #76

kahawe wrote: post #73

Earlier quoted context omitted.

> The auto industry In all fairness, I do not remember "the auto industry" almost bringing the whole capitalistic system (and with it our Western world) close to a grinding halt, according to what we were lead to believe, in the last 5 to 10 years. And after the gang-rape that GM did over here in Germany and continues to do now, oh yes you do hear about them here. > a suit is a parasitcal criminal. From what I have s…

> "In all fairness, I do not remember "the auto industry" almost bringing the whole capitalistic system (and with it our Western world) close to a grinding halt" I don't care about "could haves". These industries were all bailed out; some returned a profit to the taxpayers, some are still in the red without a chance of paying any of it back. Yet we continuously denigrate the industry that paid the money back as the "…

>Really? You must be living in a different world than I am. Just skim this thread, or any thread on Reddit...

Yes, I am. And I hope you do realize that neither of those two are even remotely representative for the vast masses of average folks out there.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#99

Post by smsm42 » Thu, Jan 10, 2013, 8:24 PM UTC

viscanti wrote: post #96

smsm42 wrote: post #95

Earlier quoted context omitted.

There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accep…

The examples you've given for voluntary deals not being OK were for protected classes. There's no such protections for companies who have run their company into the ground and need a bailout. Agreeing to a deal, no matter how onerous the contractual requirements is perfectly legal if you're not a protected class, and AIG was not a protected class. Even given that, a 14% interest rate and being asked to pay back contr…

So what you are saying some people are better than others and have preference before the law because they are "protected class" and since AIG shareholders do not belong to this class the law and fairness works differently for them. I see.