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

dealbook.nytimes.com

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

#31

Post by smsm42 »

farseer wrote: post #29
smsm42 wrote: post #24

It's kind of funny that the government apparently (if AIG claims are true) did the same to them as what politicians long criticized the bankers for doing as "predatory lending". I.e. if you consider that using one's bad situation to trick him into a loan which terms are unduly onerous is despicable thing to do for a bank - shouldn't be the same thing despicable for the government? On the other hand, if it's OK for th…

The government is not a money lender, it rescued AIG even forcibly one might say because of the doomsday risks it posed to the rest of the economy (they were underwriters on trillions of derivative contracts). The AIG bosses should be happy that they weren't tried in a court of law for issuing fraudulent CDS insurance. All said the circumstances regarding AIG were exceptional and the banking jargon doesn't apply here…

The government is a huge money lender, what you're talking about? The government lent tons of money to tons of companies, and will do it again whenever it would want to. As for if AIG bosses did something criminal or not, that's completely unrelated question to the question if the deal AIG as a company got was fair or not. Exceptional circumstances also have little to do with it - either the deal was fair, and then they don't matter, or it was not, and then circumstances are no excuse. Banking jargon has nothing to do with it either - there are plenty of examples in US law where unfair deals are considered illegal and one can be punished for doing such deals.

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

#32

Post by [deleted] »

OGinparadise wrote: post #26
fleitz wrote: post #21

Earlier quoted context omitted.

That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. Given the fiscal situation I'm sure they would have seen the error of their ways. AIG being liquidated would have been possibly the worst thing for AIG's creditors and the best outcome possible for the people of the United States. The government used the assets of AIG for it's own purp…

" That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. " Do you really think that the banks (already in the brink of bankruptcy) would have ponied up tens of billions so AIG would continue to operate? I don't think you know how much of the world's finance AIG controlled via their insurance. http://en.wikipedia.org/wiki/American_Internati…

[deleted]

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

#34

Post by cpeterso »

earbitscom wrote: post #12
ChuckMcM wrote: post #7

Earlier quoted context omitted.

I agree with the emotion but I can also see the argument that the agreement was made under duress. If you are about to die and the only person who could save you, offers to do so, but asks you to agree to something reprehensible in exchange for saving you, what do you do? At the risk of creating a strawman (the goal is illustration not substitution) let us construct a scenario, you're hanging by a rope which is break…

Actually, it's more like a guy who just conned your family out of their life savings is hanging by a rope, which is breaking. You don't feel inclined to save them, but unfortunately, they're hanging over a crowd of innocent bystanders. You agree to save them, mostly so that the others are not injured. While you do, you make them agree to give back all of the money they stole under shitty terms. They do so by screwing…

I think you just wrote the next Cohen Brothers film. ;)

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

#35

Post by icambron »

smsm42 wrote: post #30
jforman wrote: post #27

Earlier quoted context omitted.

The biggest problem with predatory lending is the salesmanship and opacity of terms that make the financial impact unclear to the person buying the loan. In this case we're talking about extremely savvy investors who were given an offer that they accepted eyes wide open. If this was a bum deal, any anger should be directed at the directors/board rather than the government.

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 "these specific things are illegal" that "any generalization of those things is therefore illegal". If the comparison weren't so speciously constructed, I'd also complain that comparing the behavior of the government towards a multi-billion dollar corporation to the behavior of lenders towards a poor person is pretty lame.

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. The US would just be making a sweetheart deal with AIG otherwise. One way to think about it is that the most obvious alternative is for the US not to have bailed them out at all.

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

#36

Post by fleitz »

OGinparadise wrote: post #26
fleitz wrote: post #21

Earlier quoted context omitted.

That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. Given the fiscal situation I'm sure they would have seen the error of their ways. AIG being liquidated would have been possibly the worst thing for AIG's creditors and the best outcome possible for the people of the United States. The government used the assets of AIG for it's own purp…

" That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. " Do you really think that the banks (already in the brink of bankruptcy) would have ponied up tens of billions so AIG would continue to operate? I don't think you know how much of the world's finance AIG controlled via their insurance. http://en.wikipedia.org/wiki/American_Internati…

I happen to have had a Bloomberg terminal on my desk the day AIG was bailed out. Lets just say I have a pretty good idea of what AIG meant to the economy.

For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity.

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

#37

Post by techsupporter »

OGinparadise wrote: post #23

Any corporation too big to fall should be too big to exist. No company should be allowed to hold hostage our entire financial system.

That makes for a nice sound bite but how do you decide it? I'm not even opposed to the idea (I'm overwhelmingly in favor, actually) but what mechanism is used to establish "too big to fail?" I realize that we can't legislate on the basis of "unforeseen consequences," but legislation by bumper sticker slogan is just as bad.

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

#38

Post by aschearer »

techsupporter wrote: post #37
OGinparadise wrote: post #23

Any corporation too big to fall should be too big to exist. No company should be allowed to hold hostage our entire financial system.

That makes for a nice sound bite but how do you decide it? I'm not even opposed to the idea (I'm overwhelmingly in favor, actually) but what mechanism is used to establish "too big to fail?" I realize that we can't legislate on the basis of "unforeseen consequences," but legislation by bumper sticker slogan is just as bad.

Presumably using the same metrics and observations that go into the decision to bail out these organizations?

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

#39

Post by baddox »

sharkweek wrote: post #3

This really makes my blood boil, but I'm trying to remain impartial while reading. The highlight of the article: > Judge Paul A. Engelmayer wrote that while Starr’s complaint “paints a portrait of government treachery worthy of an Oliver Stone movie,” the company “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.” Sure, the terms might have seemed "…

> Side note: those "thank you" commercials feel so terribly disingenuous;

Not to mention misdirected. The implication is that the American people are the ones being thanked, as if they had any choice in the matter.

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

#40

Post by robryan »

techsupporter wrote: post #37
OGinparadise wrote: post #23

Any corporation too big to fall should be too big to exist. No company should be allowed to hold hostage our entire financial system.

That makes for a nice sound bite but how do you decide it? I'm not even opposed to the idea (I'm overwhelmingly in favor, actually) but what mechanism is used to establish "too big to fail?" I realize that we can't legislate on the basis of "unforeseen consequences," but legislation by bumper sticker slogan is just as bad.

This probably doesn't work, but couldn't the government have let AIG fail and just focused on returning something to it's creditors?
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