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    AIG Bailout Turns Contentious with Lawsuits Against U.S. Treasury

    By William Browning | Yahoo! Contributor Network – Tue, Nov 22, 2011
    This story comes from the Yahoo! Contributor Network, where individuals publish their unique perspectives on some of the world’s most popular websites.
    Do you have a story to tell? Become a Yahoo! contributor

    The Washington Post reports former AIG CEO Hank Greenberg is suing the Treasury Department and the Federal Reserve Bank of New York for $25 billion. The company called Starr International, which owns 12 percent of AIG and is run by Greenberg, filed separate lawsuits Monday on behalf of AIG. The point is to recoup stock losses that have occurred since the federal government bought an 80 percent stake in company as part of a federal bailout.

    Here's a look at the troubled insurance giant from before, during and after the bailout.

    * American International Group was founded in 1919 by two Americans in Shanghai, China. The New York Times reported in 2009 that many companies in Asia still recognize the company by its old name, American International Underwriters.

    * AIG has clients in 130 countries. The company provides insurance services including property, casualty, life and retirement insurance.

    * When the economic recession hit in the late summer of 2008, AIG owed billions of dollars to banks who were suddenly filing insurance claims. The claims came from bad investments in the housing industry when billions of dollars of mortgages suddenly failed.

    * The Wall Street Journal reported Sept. 16, 2008, that the U.S. government took over AIG with an $85 billion bailout. It was feared that if AIG failed, it would have to declare bankruptcy and the financial crisis would have worsened. The article also states it was AIG who approached the federal government for a loan.

    * The terms of the loan were for two years and 8.5 percent interest. The government would take controlling interest in the company and buy an 80 percent stake.

    * The current lawsuit revolves around the value of 563 million shares the government received as of Jan. 14, 2011. AIG believes the company's shares have tanked since the government took over ownership of those shares. The stock price of AIG in January was around $43. At the close of the trading day Nov. 14, AIG was trading at $21.88.

    * CNN reports $182 billion was given to AIG. The government, in response to the lawsuit, says the takeover of AIG assets was legal and necessary. Reuters reports the legal action was decided upon as shareholders had no say in the government's takeover.

    * The lawsuit cites the Fifth Amendment against illegal seizure of property without just compensation. Dropping shares as investors bail on government-owned AIG apparently means there hasn't been enough money coming back into AIG. A report filed by AIG states the company had a net loss of $4.1 billion in the third quarter of 2011.

    * CNBC reports the government started selling shares back to private citizens in May. The initial public offering was going to be priced between $20 and $30 as there was haggling over what price should be offered.

    William Browning is a research librarian.

     

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