Email

AIG Should Sue the Government

38 | By Shah Gilani

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.

But…

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!

Best,

Shah

38 Responses to AIG Should Sue the Government

  1. G13man says:

    I vote free enterprise and the end to the fed . I also call for proof that the fed had the collateral to even lend USA the money. I call for the elapse of the fed charter in 2013. and the forfeiture or all their ill gotten assets ….

  2. Darrell says:

    Enough. This is the most vile piece of crap I have ever read. Those people SHOULD have been allowed to fail. FULL bankruptcy! To borrow from the taxpayers to compensate the “managers” who steered us into this mess with bonuses, and then whine the terms of the loan were too extreme is beyond hypocritical.

    Capitalism without risk is NOT capitalism. Something you would do well to learn.

    I am unsubscribing form this service.

    • Matt says:

      I’m with you. Acting like AIG is a victim of the big mean Fed is preposterous. Maybe Shah and Alex Jones should take their baloney show on the road.

  3. james says:

    If Aig and other company’s sue the Fed Gov’t which is the tax payers after they got billions for there self’s Then some one needs to knock them out of bussiness.

  4. Bob says:

    So what is TImothy Geitner going to do now that he is leaving his Secretary of the Treasury job? Probably become a top executive of Goldman Sachs!? “Oh…. the humanity!!”

  5. Peter Varty says:

    Hank succeeded CV Starr, the founder of AIG in the late 60′s. Starr had no children…. His stock formed Starr International.

    Hank grew AIG exponentially & certainly ranked with Jack Welch as one of the most outstanding CEO’s of all time. AIG was a National treasure until Spitzer came along. & it fell into bad management.

  6. mike says:

    Shah – appreciate all your commentaries, and knowledge. Not sure I totally agree with you here, but for sure I agree the taxpayers take the hit ultimately. What a mess, pisses me off.

  7. Phil Rourk says:

    Dear Shah: I absolutely agree that the NY Fed should be sued, as should Goldman, JP Morgan, Citi, BoA, Deutschebank and the others you named who conspired in this fraudulent conveyance of the USG´s (our) money. But we shouldn´t have to rely on the likes of AIG to bring credibility to this suit, do we? I´m not a lawyer, only an economist minor miscreant thank God, but isn´t there a way that some kind of a broad class action and/or RICO-type suit be brought in the name of American taxpayers? After all, WE are the ones that were defrauded, not AIG. (Wouldn´t it be wonderful to see Geithner & Paulson & Blankfein & Dimon &, &, & being led of to jail?)

    • Moe says:

      Amazing that this day and age, this could happened and all of them are getting away with it? They are rapping the US and nobody is doing anything about it?

    • Mark says:

      Taxpayers, is the one who should sue.take our money to help some people and all they did was help themselves and forgot about the little people.

  8. Ted says:

    You are absolutely correct. I knew all this from published reports in the Financial Times and elsewhere and you are the first person that I have seen put it into print for everyone. You forgot to mention, although not pertinent to this situation, that Henry Paulson avoided $50 million in capital gains taxes when he sold his $485 million of Goldman Sachs stock and became Sec’y of the Treasury thanks to George HW Bush’s executive orders.
    Good old Steven purchased 13,000 shares of Goldman Sachs stock knowing that Goldman was going to be made whole, 30 days in advance of the public finding out what the Fed was up to. Who needs enemies when the taxpayers have “friends” and economic rapists like these folks.

  9. DavidS says:

    Shah,

    You insist on using the term ‘socialism’ where it doesn’t belong. Socialism is an economic system that benefits the larger population. What you are describing is fascism, where government and business are in cahoots to benefit the elite. Please have the courage to call it what it is.

  10. CPCHA says:

    Shaw should know better than to even pretend to extend societal benefits to the prospects of a shareholder suit by Starr or AIG. It is ONLY about the money… PERIOD… END OF STORY! That there is some avenue to show-case the noted manipulations and orchestrations of The BIG Boys OUR Government and OUR Money, such is coincidental and not even in the radar of these most greedy PERPS. My answer to the Starr suit would be coming from the Justice Department in no uncertain terms. My bet is there will be a ‘sealed’ settlement and public servant (NOT) Hank and friends will walk away having taken another few Billion$$ of OUR Money. No one says Hank is dumb… but he’ll grab anything, anywhere and at any time if he believes he can wind up with something more than he previously had. It would not matter that in the process he has ripped apart the Mona Lisa!!

  11. cory says:

    very good articule, shah. were does ,to big to fail and to big to go to go to jail stop. the stench eminating from the the bail outs should have gagged everyone who can think. more truth pls

  12. Jay says:

    While I do not believe in a unilateral “disarmament” of “corporate personhood” as the move to amend’s effects MIGHT be, of corporate lawsuits against the government — I do certainly believe that binding them strictly to fiduciary duty, allowing the PR/HR functioning to be strictly fixed-market cause ROI and the removal of the need to petition employees for 1st amendment rights to be brought up to the shareholders for approval as a use of charitable relief rights of taxable accountancies should be taken up as a labor telemetry right in corporate/market/labor-employee shareholder communications if you really believe in the market rights under amendment use of “corporate personhood”. I hope the move to amend succeeds, but I am less than sanguine about their chances of aachieving things that result in a better instead of worse cooptation of civics. I only laud them as a pressure point at the moment. I will need to see a lot more specifics evolved, especially since constitutional conventions can be used to open other things for free-for-alls, and I’m not so sure how many people who are affected in the new gilded age of “robber baron controls” that could perpetuate or even accelerate inequities would want to see that happen. It is a sign of the inequities’ gross effects that this is coming to pass, and we’ll see what happens, but if I were AIG, and I wanted to sue, I would follow the above — put it to their employees under the 1st amendment rights in an open memo as part of employee performance HR measures, take it to their shareholders and have them vote on it, then proceed either way, yea or nay.

  13. Gerald L Bailey says:

    How does the Federal Gov’t under the U S Constitution have the authority to take over any time a private business unless an absolute national emergency? AIG, GEN MOTORS, Chrysler etc;. When the State of Indiana sued re- Gen Motors Bonds the U S Supreme Court arbitrarily and capricously denied to take the issue up. Bloomberg report Nov 29,2011 said ” Sec Paulson met in June 2008 with 20 + hedgefund mgrs’ in NY and told Congressional hearing people on second visit just how bad the situation was with Fannie and Freddie. Congressmen , Senators and Mgrs. then knew to sell securities and short the market. The Federal Courts will eventually and corruptly dismiss this case of Hank’s. The rule of law was totally gone from USA in 2008 and will never return.

  14. ASHLEY GOODMAN says:

    Talk about nausea. I’ve got it big. I love my country and despise it’s feckless leaders. We live to keep the rich, rich, the middle class enslaved and the poor where they belong. My friend says it was never different at any time history. Maybe the story should get rich if you want to stay rich. If this is true and all civilization eventually collapse. Why should I worry? I have tried to live a large part of life with the admonition to myself “Have an adventure a day!” and I did.

  15. J. Wright says:

    Sorry. AIG should have been allowed to fail. I have very little respect for the Wall Street denizens who, after all that has happened, remain so short-sighted and self-focused. No corporation is too-big-to-fail. All we’ve heard from Wall Street are the whines of the overpaid and underthinking who are more interested in their bonuses than their business.

    A word of warning to the TBTF corporations: There is no bailout the next time. And judging from the view down here in the cheap seats, there will be a next time.

  16. LA says:

    Would this move, AIG joining the lawsuit, be just like their product that helped sink them? Insurance to brokers who sold derivatives for when they tanked? It paid the brokers and not investors the brokerage firm (reimbursed) and not the investors the brokers sold, correct?

    Seems like to me that AIG joining the lawsuit they would profit three times off of one bad deal…and if they don’t, well, just twice. And on the receiving end, the tax-payers (who were some of the investors) take the loss twice. Anyway if AIG joins the suit that we’ll take a third loss if they win?

  17. Kevin says:

    As an Insurance Company, AIG, undertook with lack of due diligence, massive obligations to make those whole who patently misrepresented the quality of the goods they offered. If they had refused to pay on these spurious claims they would have remained viable, while the claimnants fought their case. As an individual I lost , and like many others can do nothing! Starr had an insider’s knowledge on the lack of due diligence on this matter and did nothing to pre-empt it in a timely fashion. Part of the problem? I believe so.

  18. Marge Wheatley says:

    READ ..the destruction of america,,APFN,,,,,from bob 1776 on yahoo web-site…..explains it all……..

  19. Gordan Finch says:

    Whilst your comments are highly regarded, the name AIG is the most well known and for good reason.

    But lets not forget the Parent Company> Zurich Financial Services, it trades under numerouse names to hide the true identity of the Insurer infamous for fraud corruption rigged bids and worse “Zurich”.

    Now trading I understand as (ZIG– Zurich Insurance Group, but then it may have changed its name again.

    Ace Insurance has the AIG exec name Greenburg in company documents –seems things are still the same. Ace are the insurer beind the card protection insurance scam on the internet and listed on itsfraud.com

  20. Cynthia says:

    Since greed and corruption in this country has penetrated every level of our superior ‘checks and balances’ system,
    what can possibly bring this to an end?
    Can ‘the people’ effect change anymore?

  21. Carolyn says:

    Thanks Shah again for your insight on this subject ..you always make it plain and obvious. Its one of your gifts … and BTW .. thank you for your recommendation on reading “The Creature From Jekyll Island” by G. E. Griffin…I’m only 200 pages or so into it and already “gobsmacked”..I think I’ll have to read it once/first for shock value , and then re-read it for ‘sinking into the comprehension’… but have already recommended it to four of my trading / trader friends. Cheers

  22. Mr Ed says:

    Shah please allow me to offer some editorial advice: When you use an acronym or initialism that will feature prominently in your text, such as AIG, then spell.it out on first occurrence with the abbreviation following in parenthesis e.g.

    “If you think it’s outrageous that the American International Group (AIG) might join a lawsuit seeking $25 billion in damages from the U.S. Government….”

    This is not only in the interests of clarification and good journalism–it is also a courtesy to readers who may not be familiar with the abbreviation. (Where I come from AIG = Australian Industry Group).

    Other than that, I love your indictments.

Leave a Reply

Your email address will not be published. Required fields are marked *


one + 4 =

Protected by WP Anti Spam