After thanking the United States government and taxpayers for its bailout, AIG is considering a lawsuit against the government for what it describes as “unfair” bailout terms.
The lawsuit is being brought on by a shareholder of AIG, which was a big player in the financial crisis of 2008. The shareholder reasons that the AIG bailout was “an illegal action” because it nationalized a corporation with the government owning its stock.
AIG was bailed out by the federal government to the tune of $180 billion. The Financial Crisis Inquiry Commission (FCIC) found AIG failed because it sold insurance without hedging its investment.
The commission found that AIG “primarily because its enormous sales of credit default swaps were made without putting up initial collateral, setting aside capital reserves, or hedging its exposure — a profound failure in corporate governance, particularly its risk-management practices.”
The report noted “AIG was so interconnected that… it was too big too fail.”
Without the bailout, the commission said AIG’s collapse could have brought down its counterparts throughout the financial system.
And so, it’s rather ironic that an AIG shareholder — whose shares would have been worth exacty $0 — is now suing the same government with a straight face.