Check your indignation at the door.
If you think it’s outrageous that AIG might join a lawsuit seeking $25 billion in damages from the U.S. Government (which means you) for bailing it out with $182 billion of your money, you’re not alone.
But, don’t let your visceral reaction to what seems like ingratitude on steroids blind you.
Things are only what they seem on the surface.
The suit is being brought by Starr International, which was, at one time, AIG’s largest shareholder. Starr is controlled by Hank Greenberg, AIG’s founder and former CEO. The suit seeks remuneration in the Federal Courts, claiming shareholders’ rights to due process and equal protection were violated under Fifth Amendment safeguards against seizing property without just compensation.
What’s driving the lawsuit?
Greenberg wants AIG to join the Starr suit. AIG has said that it will weigh its options.
Understandably, reaction to AIG even contemplating joining the suit is that it would be “disgusting.” In fact, I highly doubt they will, precisely because of the backlash.
What if Starr was suing the New York Federal Reserve Bank for taking billions of dollars from AIG to pay 100 cents on the dollar to AIG’s counterparties, monies that they were not entitled to, but that they needed because they were veering into insolvency?
Would that be disgusting? Would it then be disgusting if AIG joined that suit?
Would you be outraged if you knew (remembered) that a few of the counterparties that reaped billions from AIG, courtesy of the New York Fed’s theft, were foreign banks including Deutsche Bank AG and American too-big-to-fail banks including JP Morgan Chase, Bank of America, and the winner in the AIG cash grab-bag, the venerable Goldman Sachs?
Would you be disgusted if you knew (remembered) that Timmy Geithner was president of the New York Fed back then? Would you remember that the chairman of the New York Fed at the time was a former partner and board member of Goldman Sachs, namely one Stephen Friedman? That’s the same Stephen Friedman who had to step down, from the Fed – not Goldman – because he used inside information on Goldman’s bailout to buy more Goldman stock! Would you be disgusted if you knew (remembered) that the then-Secretary of the Treasury, Hank Paulson, formerly Goldman’s CEO, was in daily touch with the New York Fed and knew exactly who was getting backdoor bailouts against AIG’s backstop?
You’d be disgusted, right? Well, that’s exactly how it happened.
So here’s something you may not know, something that you may not be so indignant about, something that’s not disgusting: Starr International is suing the New York Fed.
I believe that AIG absolutely, positively should join in that suit filed in the U.S. District Court in Manhattan.
If you believe that the Fed is a proxy for the U.S. Government, or if you believe, like I do, that the U.S. Government is a proxy for the Fed, then you might think twice about AIG joining the Starr suit against the Government.
One point of outrage, expressed by the idiots and liars in Congress, fuming over AIG even thinking about joining the Starr suit, is that AIG had a choice, they could have gone into bankruptcy and not taken taxpayer money, so how dare they turn and shame their “saviors!”
That’s a lie. AIG would never, as in never, have been allowed to go belly-up. If the too-big-to-fail banks were all too big to fail, then the failure of the largest insurance company in the world – the world – would have had repercussions not only for policyholders and reinsurers and counterparties, but for the banks and markets where AIG held its investment portfolios.
No, AIG was used by the NY Fed and the Government. It became the line in the sand as far as articulated and backdoor policies to protect the interests of global capitalism.
And that’s not wrong.
That is, unless you believe that free markets should be free and that government interference on an ever-growing scale is a part of the protected class shoving us into the cellar of a type of socialism where capitalist profits are privatized and losses are socialized.
Give me a break.
AIG won’t have the stomach to join either or both suits, to come out and say, “We desperately need to shine a harsh light on the partnership between the Fed, the government, and the protected class, to expose the conspiracy to cover their own backsides. So we’re joining this suit. It’s to our own public relations detriment but for the betterment of free markets, even though we know that, in the end, if the truth becomes transparent, neither an insurance company our size or any too-big-to-fail bank should ever be allowed to bring the world to its knees again.”
You go, Hank Greenberg!