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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

#51

Post by paganel »

fleitz wrote: post #36
OGinparadise wrote: post #26

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. " 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.

> 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.

Around the same time US Treasury Secretary Hank Paulson was begging people on his knees for the rescue of Wall Street (http://www.guardian.co.uk/business/2008/sep/27/wallstreet.us...) and no-one generally had any idea if the Western financial system as it was right then had much to live. I say that AIG depending on (private) third parties for its rescue would have meant certain bankruptcy.

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

#52

Post by icambron »

ChuckMcM wrote: post #7
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 "…

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…

I know you don't mean to draw a parallel, but I'm nevertheless going to point out that the illustration isn't very...illustrative. AIG was in a situation where the expectation was for it to go out of business because of its own (possibly illegal) mismanagement. It was offered a deal whose price, rather than being morally repugnant or open-ended, was merely expensive. And no one was going to die in any case. So let's try this:

You've decided to push a rather nice antique couch off the back of a high-flying plane for reasons all your own. While it falls, someone radios you and says, "look, I'll snatch this couch out of the air with this really expensive-to-fly jet with grappling hooks I have, but afterwards you'll owe me 80% of what you make selling it or renting it to those weird antique museums". Turns out the guy calling you really just wants to prevent the couch from crashing into a residential area, but he figures that in order to afford this crazy couch-saving stunt, he needs a big chunk of equity in the couch, which will be splinters if he doesn't save it anyway. And you, having decided that dropping a valuable piece of furniture from 30,000 feet was a bad idea after all, take the deal.

It turns out that you made a good move, because later you sell the couch and make lots of money, a lot of which goes to the crazy couch-saver guy. And you still think the deal sucks, so much so that, apparently, it was illegal for some reason, and you should get to keep a higher percentage of the couch's proceeds.

Now, what part of that seems like duress?

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

#53

Post by Zenst »

So X company screw up, needs bailout as without would cease to be and all shareholders would lose there money at the very least if they did not get a bailout.

This impacts non-shareholders who inderiectly impacted by less money in goverment to finance other area's.

Company pays back the bailout and now the shareholders are crying they want more money as they think it was unfair in the first place.

Can we just label them financial terroists and put them all in orange oneseys and then see who is laughing about it.

Bottom line what a bunch of utter cnuts. I hope the goverment and the people educate them fully and don't use any lube whilst doing it.

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

#54

Post by rjtavares »

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.

Every antitrust law is affected by that problem. If subjectivity is a problem then you shouldn't be in charge.

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

#55

Post by Uchikoma »

retube wrote: post #47
newman314 wrote: post #33

Just posted a related article from Rolling Stone. http://news.ycombinator.com/item?id=5025234 It's both mindblowing and disgusting the extent which banks have manipulated things to the point where they have their cake and eat it too.

Rolling Stone has a huge anti-bank bias. The material they present is usually misleading, out of context and often plain wrong or mis-informed. This is absolutely not a credible source on the financial crisis. Indeed Matt Taibbi is basically just a troll.

It would help your argument if you cite misleading, plain wrong, out of context or misinformed parts of the article to make your point.

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

#56

Post by wslh »

ChuckMcM wrote: post #7
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 "…

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…

> 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?

I see it differently: if you are walking down the street and see that a shop is closing its doors, do you help the owner to stay open knowing that he can sue you later?

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

#57

Post by Mvandenbergh »

anigbrowl wrote: post #43
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…

Yes, the board of directors of AIG are exactly like financially illiterate people trying to get a mortgage to buy their own home.

I'd like to see them try and prove they were taken advantage of by referencing their own incompetence. "Your honor, the defence claims that we were sophisticated investors but look at what we did. Are these the acts of a sophisticated man who knows what he's doing?"

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

#58

Post by yummyfajitas »

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'm confused about the analogy - who did AIG shareholders con?

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

#59

Post by martinced »

AIG should STFU and be glad to be living in a socialist economy.

In a real free capitalist economy they'd be dead. It sure would have brought turmoil but... The sooner this fake economy goes down, the earlier real recovery can start.

We're only pushing the can down the road and, meanwhile, creating all the necessary condition for a much harder landing.

Nicolas Nassim Taleb said that companies like GS and AIG should STFU and that their employees should be getting minimum wages (and certainly not more bonuses).

You have to realize that AIG is effectively on "life support" as Taleb puts it.

When you're on life support because you screwed and when an entire country is bleed by taxes to keep you alive (all the money that went to AIG is taxpayers money), you better STFU.

I can't even begin to understand the various people explaining here that the terms were not reasonable.

Next time let GS / AIG and all the ones benefitting from the "crumbs of capitalism" as Buffet puts it (i.e. finance) to die a horrible death.

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

#60

Post by makomk »

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…

Not exactly. The key thing you're missing is that AIG weren't actually the main beneficiaries of the AIG bailout, the people who bought CDSs from them were. Effectively, a bunch of other companies convinced AIG to to sell them insurance for way less than it should cost, in many cases on property they didn't actually own, by conning them as to how risky it would be.

To continue the metaphor, it's like if a guy conned your family out of their life savings, and then the Government generously seized your home in exchange for paying the guy who scammed you the rest of the money you owed him which you couldn't afford to pay.

Edit: see, for instance, http://www.huffingtonpost.com/david-fiderer/the-cdos-that-de...

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