Some beggars wouldnt merely be choosers – they would be plaintiffs. In 2008, AIG was flat on its back, about to take its last breath before going into the corporate afterlife. (The Supreme Court tells us that corporations can hold religious beliefs – so who’s to say their souls dont live on beyond Chapter 11….) AIG’s liabilities outstripped its assets by tens of billions of dollars. Insolvent, AIG would have had little choice but to be dissolved via bankruptcy, its assets liquidated to pay creditors, who would have received pennies on each dollar of debt. Despite AIG’s thousand-dollar share price on the eve of the financial meltdown, its shareholders would have lost their entire investment, their shares zeroed out, without a cent left over.
You’d think those shareholders would be mighty grateful to the US government, which bailed out AIG to the tune of $182 billion. Though AIG’s share-price was pummeled, it’s still around fifty bucks today, which is fifty bucks more than it’d be without the bailout. But some of those shareholders are not grateful – and they are suing the US government because, in their opinion, the bailout AIG received wasnt generous enough.
It’s true that while AIG’s creditors got a sweetheart deal, AIG itself did not. But it wasnt left to die, as was Lehman Brothers, which on September 15th, 2008 departed this world for the dark night of Chapter 11, never to return. Lehman had been the nation’s 4th largest investment bank, and its destruction was a body blow to an already-teetering US economy. The federal government learned its lesson, and resolved to save AIG – the world’s largest insurance company – but it would do so on terms onerous enough to serve as fair warning to other financial firms. The fear was that if AIG’s deal was too good, others might be tempted to make similarly risky bets, with the expectation that the government would bail them out if things didnt pan out. Instead of a golden parachute, AIG got a no-frills heimlich maneuver – but it’s not like the US government owed it to AIG to do anything at all.
AIG itself is not a party to the lawsuit. As AIG CEO Robert Benmosche said in an interview, “It’s not acceptable socially for AIG to have taken this money and think that we could come back and sue the government because [they] made too much money on the deal.” But not all AIG shareholders share Benmosche’s qualms. The suit is led by former AIG CEO Maurice Greenberg, a one-time billionaire, now scraping by on assets worth a paltry $300 million. For Greenberg and his co-plaintiffs, the $182 billion bailout they received from US taxpayers wasnt charity enough – they have demanded that US taxpayers cough up an additional $50 billion.
To grasp the enormity of AIG’s bailout, it helps to compare it to other government spending programs. For example, AIG’s bailout is enough to cover all US government expenditures on welfare (TANF) and food stamps (SNAP) – combined – for two years! The $50 billion that AIG shareholders are suing for would by itself nearly cover the annual cost of the EITC program (a subsidy for the working poor).
Beyond the inanity of conservative talking points, these figures reveal America’s true takers. While millions of working American families receive a pittance in public support, wealthy AIG investors have had their trough filled by US taxpayers – which wont stop them from suing till that trough overflows.
The Field Guide is off Monday for Columbus Day – we’ll be back with new material on Wednesday, October 15th.