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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  • http://twitter.com/williambanzai7 williambanzai7

    AIG was and is a despicable bunch of second rate Wall Street wannabes who equal or exceed their bankster cousins in the hubristic ingrate column.

  • Krusher

    How about we sue AIG for failure to use prudence and common sense? How about we sue AIG for being a bunch of greedy, corrupt criminals?

  • RTK3

    You have ” AIG toyed with the idea of suing the federal government” wrong. There is an existing suit filed by Starr/Hank Greenberg against the Treasury. It is a shareholder lawsuit, not one initiated by AIG, nor one that AIG is participating in. For obvious reasons, Starr/Greenberg wanted AIG to be a co-plaintiff in the action. Starr obtained a directive from the federal court compelling AIG to make a decision on joining the lawsuit. The board had a fiduciary obligation as well as a legal obligation to cosider the request. They did so by have presentations from Starr/Greenberg as to why they join the lawsuit and presentations by both the Teasury and the Fed as to why they should not join the lawsuit. Shortly after the presentations, they voted not to join the lawsuit. There was no “toying”, it was a deliberate and thorough evaluation they were compelled to undertake.

  • http://www.facebook.com/profile.php?id=100000111133695 Lisa Johnson

    Doesn’t “too big to fail” AIG have risk assessment people to evaluate these worthless investments and warn them not to buy them? I find that difficult to swallow.

  • lynchie

    They all knew and if truth be known were positive if the shit hit the fan we would bail them out. They weren’t wrong. No one was charged, no one went to jail and I heard from some of my friends at Merrill that they are doing it all again. They made so much money it was obscene. Reset—game on.

  • Naja pallida

    I find it highly unlikely they didn’t know. They were playing hot potato with a grenade that they knew was going to blow up in their faces at some point. They were just gambling that they’d make a butt-load of money before the shit hit the fan. And they weren’t wrong, the individuals involved made out like bandits – even if their companies did not, but the companies then got handed a pile of government money for their trouble. Most of which went directly into the pockets of the same individuals who already made a fortune by making poor decisions. So they took a double payout, and only left enough money in the company to keep it afloat to keep doing the same crap.

  • Hue-Man

    The ratings agencies, Moody’s and Standard & Poors, aided and abetted. Either they knew the packaged mortages were junk or they ought to have known – it is their only job, after all – yet they told the world (including the non-US investors who got ripped off) that this was investment grade paper. Criminal fraud isn’t far off the mark.

  • mf_roe

    The Fed isn’t interested in helping the taxpayer, it exists to prey on the taxpayer. It isn’t part of the government it is a cartel of banks which operate outside the tax system.

  • http://twitter.com/BillFromDover Bill from Dover

    Hey, why not… as long as there is a buck to be made in the process?

  • http://twitter.com/BillFromDover Bill from Dover

    AGI went down the tubes simply by being on the losing end of betting on this crap (credit default swaps) to the tune of around $167 billion that they couldn’t cover.

    It was the bets, not the ownership of this junk that would have destroyed them (and the winners of these bets) had Uncle Sam (we) not have bailed them out.

    Screw them and the bets they rode in on!

  • MyrddinWilt

    Its interesting to see what the Republicans did to the CEO of Bank of America. Its an object lesson in how much they actually stick together.

    When the crash hit they told Bank America that it just had to buy CountryWide to stop the whole market going under. Pretty soon it became clear that CountryWide’s books were utterly fictitious and they have lent out billions to people who couldn’t pay on property that in many cases had never even existed. Then Merril goes under and its the same deal.

    Having railroaded Ken Lewis into buying them out of the hole using Bank of America money, the Bushies then blamed him for the state of the books of the banks they had forced him to buy. A few month later he is forced into retirement. Not that that is going to be exactly uncomfortable for him with a golden parachute thats not exactly small.

    I don’t think anyone exactly needs to feel sorry for Lewis, but anyone in that situation should think twice before helping the Bushie types out of a hole.

    Most of the junk that is being talked about is the result of the Countrywide acquisition. The lender simply didn’t know what they were lending on and didn’t really care as they were pushing the risk off onto others – or so they thought.

    Lax regulation did not help the banking industry but it did help a few individuals get very rich. When sub prime loans first appeared, the CEO of Countrywide spoke out against them. Then as he started to lose business to them… well he turned tables and decided to become kind of the subprimes.

  • cole3244

    thats like suing yourself.

  • condew

    I can only hope the Fed is angling to get the bulk of any funds recovered by AIG as a reimbursement to the American taxpayers.

  • UncleBucky

    Jump! Jump! Jump! Jump! Jump! hahaha!

  • http://www.rebeccamorn.com/mind BeccaM

    I have only one thing to say to these self-entitled plutocratic bastards:

  • Fifi

    Except that AIG probably didn’t know it was garbage.

    And that’s an even more frightening thought. If financial heavyweights like AIG’s life insurance divisions couldn’t do due diligence on those products, just imagine how badly all those pension funds, endowments and such got shafted by Wall Street.

  • Fifi

    AFAIK, AIG was the seller in the unhedged CDS dealings that forced them to caugh up tens of billions of dollars to Goldman Sachs, Societe Generale, Deutsche Bank and so on and bankrupted the company.

    So those new (potential) lawsuits are unconnected to the CDS scandal and deal with other transactions, where AIG was the buyer of investment “products” packaged by Wall Street “wizards”.

    Still, anything that can hurt such upstanding members of Wall Street such as Deutsche Bank, Goldman Sachs and JPMorgan Chase is very good news :-)

  • mf_roe

    Foolish to believe that the Fed will let anything happen that threatens the System.

  • perljammer

    Let’s see here …. Banks get bailed out. AIG gets bailed out. Supposing AIG is successful in suing banks for “causing” AIG to need bailout, do banks then need another bailout to recover lawsuit loss?

    Crap. They really should sell programs for this drama production.

  • Naja pallida

    Except that AIG knew it was garbage, but thought they could make a quick, easy buck off it so bought it anyway. They’re just as culpable as the banks are. Let them all sue each other into oblivion, we’ll all be better for it.

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