The following editorial appeared recently in the San Jose Mercury News:
Had the American International Group completely lost its collective mind? We weren't sure a day ago, but fortunately, the answer appears to be no.
Former AIG CEO Maurice "Hank" Greenberg is suing the federal government for $25 billion on behalf of shareholders, alleging that the $182 billion U.S. bailout of the Wall Street conglomerate in 2008 cost shareholders billions because of its "onerous terms." Wednesday the board considered whether AIG itself should join that lawsuit. Ultimately, it decided not to.
Smart move, for sure. Taxpayers who knew this little drama was playing must have been ready to explode: Remember, if the federal government hadn't stepped in during those final months of the Bush administration, the insurance firm — one of the too-big-to-fail conglomerates — would have gone bankrupt, and shareholders' stock might have been worthless.
The absurdity of the suit is wonderfully captured by AIG's marketing department, which is running a "Thank you, America" campaign for saving the company.
Following the collapse of Lehman Brothers, AIG became the poster child for reckless Wall Street mismanagement for the extent to which it had backed risky credit-default swaps. AIG has repaid the government in full for the bailout, but the fact that it even considered joining the lawsuit is a reminder that Wall Street requires close watching and smart regulation to avoid another financial disaster for the American economy.