The board of American International Group Inc. decided on Wednesday not to join a lawsuit against the U.S. government over the terms of the company’s bailout, following two days of fevered backlash from Congress and the public over the prospect.
AIG had been weighing whether to join a lawsuit filed by its former chief executive, Hank Greenberg, and his company Starr International, which owned 12 percent of the insurer before its 2008 rescue.
Greenberg alleges the rescue was unfair to shareholders, and that the Federal Reserve Bank of New York charged an excessive interest rate on its initial loan. He has sought billions of dollars in damages.
AIG said the board carried out its legal and fiduciary duty to consider the possibility of joining Greenberg’s suits before making its decision.
“America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us,” Chairman Steve Miller said in a statement.
AIG said it would not pursue Starr’s claims nor would it allow Starr to pursue them on AIG’s behalf, which sets the stage for a fresh legal fight between Greenberg and the company.
The idea AIG might sue the government struck a raw nerve with the public, which took to the Internet to vent its anger at what it viewed as the company’s audacity. The volume of AIG mentions on Twitter rose more than 50-fold Tuesday, according to Topsy Analytics.
Starr’s attorney, David Boies, said in a statement that AIG’s effort to block Starr from pursuing claims was contrary to shareholders’ interests.
“Whether or not the AIG Board will be successful in blocking Starr’s efforts to recover damages for their shareholders will ultimately be decided by the Court,” Boies said.
Former Obama administration adviser Austan Goolsbee said “GO SCREW YOURSELVES” in a multi-tweet tirade. Comedian Andy Borowitz drafted a mock letter from the company to taxpayers, asking for more bailout money to pay for the cost of the lawsuit. Dozens of obscene comments made descriptive references to the anatomy of Chief Executive Robert Benmosche.
And those were the gentler barbs. The New York Daily News ran an editorial cartoon in which a lifeguard saves a drowning man with “AIG” on his belly. When the lifeguard asks the man how he feels, the victim says, “like suing you.”
The vitriol was just like in late 2008 and early 2009, shortly after the bailout, when AIG employees hid ID badges and their families were threatened amid an uproar over post-rescue bonuses.
A group of congressmen led by Vermont Democrat Peter Welch sent AIG’s chairman a letter late Tuesday, advising, “Don’t do it. Don’t even think about it.” Other members of Congress threatened hearings.
AIG took to Twitter to defend itself, saying it was legally obligated to at least consider action. But its defense mostly fell on deaf ears.
The government rescued the company from the brink of bankruptcy in September 2008 with a bailout that ultimately topped $182 billion. After a recapitalization deal closed in early 2011, the U.S. Treasury owned 92 percent of AIG.
Treasury sold the last of that stake in mid-December. All totaled, the government has said it earned a return of $22.7 billion on the rescue.
AIG shares were flat at $35.65. The stock lost half its value in 2011 but then rose more than 50 percent in 2012, as it showed consistent profitability.