AIG wants to sue banks who sold them garbage

AIG has made a lot of bone-headed statements recently including the time the AIG CEO said “retirement ages will have to move to 70, 80 years old” from the comfy confines of his villa in Croatia.

More recently, AIG toyed with the idea of suing the federal government for saving the company, and its fat paychecks, with a $182 billion bailout.  How silly of us to not have been more generous to AIG.

This latest effort though is certainly worth watching. AIG would like the right to sue the banks who sold them garbage — potentially including Deutsche Bank, Goldman Sachs and the now (mostly) gone Bear Stearns.

If you recall, many complained during the bailout days that the Fed forked over billions to AIG that went over to Goldman Sachs, saving Goldman from a multi-billion dollar hole in the books.

Without that cash – 100 cents on the dollar, rather than a fraction of it’s nearly worthless actual value – some question whether Goldman could have survived the Wall Street crash. Unfortunately, few questions were asked, and the indirect Goldman bailout was mostly ignored and swept under the carpet.

Now that AIG is coming out of the woods, they are seeking permission from the Fed to pursue the banks that sold them the worthless products. (The same worthless products that the Fed insisted on paying out 100 cents on the dollar.) While AIG may still be a despicable, ungrateful company, these lawsuits could potentially be very interesting to follow.

AIG is not part of the popular clique on Wall Street, so it’s still questionable how much they would succeed in such politically-laced legal action. One would hope that something good could come of this. Too many on Wall Street and the political class still fail to recognize how bad off they were during the crisis, so perhaps this would bring a dose of reality to the debate.

Then again, with all of the money they pump into the political system, maybe not. New York Times:

Since the summer of 2011, the insurance giant American International Group has been battling Bank of America over claims that the bank packaged and sold it defective mortgages that dealt A.I.G. billions of dollars in losses.

Now A.I.G. wants to be able to sue other banks that sold it mortgage-backed securities that plunged in value during the financial crisis. It has not said which banks, but possibilities include Deutsche Bank, Goldman Sachs and JPMorgan Chase.

But to sue, A.I.G. first must win a court fight with an entity controlled by the Federal Reserve Bank of New York, which the insurer says is blocking its efforts to pursue the banks that caused it financial harm.


An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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