AIG Shareholders Give U.S. Taxpayers the Middle Finger (And Other Unbelievably True Stories from the Week in News)

by John Kiernan on January 9, 2013

AIG shareholder suitHold on – is this the news, a dream, or some sort of Oscar Wilde-type satire?  That’s along the lines of what I was thinking last night while watching Anderson Cooper and Erin Burnett report a pair of stories seemingly straight out of The Twilight Zone or Ripley’s Believe it or Not.

I mean, could AIG actually be SUING the U.S. government (as well as you, me, and every other taxpayer by extension)?  Are U.S. politics really so flawed that rape is actually LEGAL in California if the victim is single and the perpetrator impersonates her boyfriend?

If this is the first you’re hearing of these matters, I’ll give you a second to digest.

Ok, by now you’re probably thinking there has to be more to these stories than sensational headlines, and you’re right.  But that doesn’t necessarily make them easier to stomach.  Allow me to explain.

AIG to America:  You’ve Been Served!

Like a traffic light with green at the top or a hot-and-cold love interest, the AIG camp has been sending decidedly mixed signals of late.  Shortly after unleashing what one can only assume to be a very costly national advertising campaign thanking America for bailout money and touting the fact that it has repaid the loan with interest, news broke that AIG was suing the U.S. government.  That, of course, is simply another way of saying they’re suing American taxpayers, and as you can expect, the public outcry was significant.

For those of you who need a quick refresher, AIG is a global insurance company that received a $182 billion (yes, billion with a “b”) bailout in 2008 despite the fact that its amazingly risky investment practices helped thrust the economy into one of the worst recessions ever.  You see, AIG was thought to be “too big to fail” given that it insures pretty much every major company around the world, from airlines to banks.  Economists believed that if AIG fell, so too would the entire global financial system.

So, in order to balance the need to preserve global financial soundness with the justifiable anger of taxpayers on the hook for AIG’s mistake, the government threw the company a life raft with a number of strings attached.  AIG would get $182 billion, but the government would get 80% of the company, and AIG would have to repay the loan with considerable interest.

Back to present day, the idea that AIG would in effect bite the hand that fed it seems ludicrous.  However, lost in the shuffle of our modern “140 character or less” media landscape was the clarification that the lawsuit wasn’t being brought by AIG per se, but rather by a group of investors led by former CEO Maurice “Hank” Greenberg.  The suit claims that the government basically took advantage of AIG’s dire financial straits and made a loan with oppressive, unfair terms.  AIG’s board would still need to vote on whether to join the suit, allow Greenberg to pursue it using the AIG name, or distance the company from the case.

AIG’s executives reached their verdict on Wednesday:  stay away!

In other words, the idea that “AIG” is suing the government isn’t exactly accurate.  Still, the fact that Greenberg and Co. are seeking at least $25 billion in damages doesn’t sit well with me and, I’m sure, you either.  While it remains unclear how much validity this action actually has, it’s undoubtedly good news that AIG didn’t stoop to its shareholders’ level.  Plus, as we wait to see how things play out, we can enjoy watching lawmakers chastise anyone related to the company.  Here are some of the notable comments from yesterday and today:

Rep. Peter Welch (D-Vt.):  “Taxpayers are still furious that they rescued a company whose own conduct brought it down. Don’t rub salt in the wounds with yet another reckless decision that is on par with the reckless decisions that led to the bailout in the first place.”

Matt O’Brien, associate editor at The Atlantic:  “Thank you, AIG, for reminding us that you guys are the worst.”

James Downie, Opinions editor at The Washington Post:   ”AIG sues doctors who performed lifesaving heart surgery on them for suggesting they might want to watch what they eat.”

Robert Reich, former secretary of labor:  “We should counter-sue for stupidity.”

Sen. Elizabeth Warren (D-Mass.): “Taxpayers across this country saved AIG from ruin, and it would be outrageous for this company to turn around and sue the federal government because they think the deal wasn’t generous enough. Even today, the government provides an ongoing, stealth bailout, propping up AIG with special tax breaks — tax breaks that Congress should stop. AIG should thank American taxpayers for their help, not bite the hand that fed them for helping them out in a crisis.”

Neil Barofsky, the inspector general of the Wall Street bailout:  AIG’s involvement in the suit would be a “giant middle finger to the taxpayer.”

Antiquated Laws Run Amuck

I’ll only touch on this one briefly because it’s not directly related to the world of money (although you could certainly argue that the financial troubles of the past few years have been exacerbated by our inefficient bureaucracy).

Apparently, a California law penned in 1870 holds that rape by impersonation is only rape when the perpetrator is pretending to be the victim’s husband.  As a result, Julio Morales’ 2009 conviction for allegedly raping an 18-year-old girl while she slept was overturned last week because Morales was acting under the guise of being the victim’s boyfriend.  If he had forced himself on a married woman, pretending to be her husband, the ruling would have held up.

To make matters worse, a 2011 attempt to update the law wasn’t even put to a vote in the California state legislature because, as legislators claim, a federal mandate prohibited legislation that would increase the state’s already overcrowded prison population.  In other words, they decided to go easy on rape because there’s nowhere to put all the rapists.  WHAT?

Fortunately, a new bill rectifying this situation has already been introduced, and hopefully it will apply retroactively.  While we wait to see, here are a few more antiquated laws from around the U.S.

  • Pennsylvania state law requires motorists to stop every mile to launch a “rocket signal” and wait 10 minutes for any livestock to clear the road when driving at night.
  • Alabama law prohibits wearing a fake mustache that could illicit laughter while in church.
  • It’s illegal to carry ice cream in your back pocket in Kentucky.
  • “Molesting” a butterfly carries a $500 fine in California.
  • It is illegal to have sex with a porcupine in Florida.
  • People in Gary, Ind., are prohibited from theaters and public vehicles within four hours of eating garlic.

 

Have thoughts about the AIG bailout or California legal loopholes?  Share them in the comments section below!

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