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http://www.foxnews.com/politics/2013/01/09/lawmakers-outraged-after-aig-announces-it-is-weighing-joining-suit-against-us/

This story could be interesting to look a little deeper into.

AIG said that, by law, its board must consider three options: take over the lawsuit and pursue the claims on its own; attempt to prevent the claims from being pursued by Starr; or allow Starr to continue to pursue the complaint on AIG's behalf.

Read more: http://www.foxnews.com/politics/2013/01/09/lawmakers-outraged-after-aig-announces-it-is-weighing-joining-suit-against-us/#ixzz2HUh12SHM

So it may have no choice in the matter, bar no 2 where they will get no recompense if Starr wins?

Crazy.

Plus, I think there are some potential lawsuits from shareholders if they do NOT join the suit.

The whole situation just makes Wall Strret operations look really, really counter-intuitive and sleazy?

Let me get this straight: the shareholders are suing the government because they didn't receive an extra compensation as a part of the bailout that actually made it so that their shares still have value today? Is this the case?

They decided not to join the lawsuit.

http://news.yahoo.com/aig-says-not-join-lawsuit-against-u-government-201052589--finance.html

It's strange, because the roster of complainants in that lawsuit perfectly seems to mirror this list of who'll be first up against the wall when the revolution comes...

 azazel the cat wrote:
It's strange, because the roster of complainants in that lawsuit perfectly seems to mirror this list of who'll be first up against the wall when the revolution comes...

I am both down with your statement and saluting of your Hitchiker reference.

 Frazzled wrote:

 azazel the cat wrote:
It's strange, because the roster of complainants in that lawsuit perfectly seems to mirror this list of who'll be first up against the wall when the revolution comes...

I am both down with your statement and saluting of your Hitchhiker reference.

I second that. If AIG had joined the law suit I would suggest the reasonable response of burning their corporate head quarters and making a pile of human skulls.

Basically, it's just a suit over what the real value of AIG was at the point of the bail out. Basically the government took over, pumped in about 180 billion and said that's worth about 80%. Which it may or may not have been - that's the question before the courts.

Because while there's no doubting AIG was screwed without bailout money, the government still has to offer an arm's length, fair market value price for the assets it's taking. So the question is if some other company had come in and offered 180 billion, what's the most likely percentage of the company they could have claimed for that money? Which will be tough for the courts to decide (making it likely they'll avoid ruling on a subjective business decision) but still a reasonable thing to bring before them.

I mean, sure, it's unbelievably arrogant and more than a little bit shameless that someone would bring a case like this, after their own incompetence and greed tanked the company in the first place, but this is Wall Street we're talking about here, you leave your shame at the door.

sebster wrote:Basically, it's just a suit over what the real value of AIG was at the point of the bail out. Basically the government took over, pumped in about 180 billion and said that's worth about 80%. Which it may or may not have been - that's the question before the courts.

Because while there's no doubting AIG was screwed without bailout money, the government still has to offer an arm's length, fair market value price for the assets it's taking.

No, I don't believe they do.

The often-worshipped laissez-faire capitalist system in America, of which AIG was a massive proponent for de-regulation, does not require a "fair market value price" for AIG, as the market itself will regulate whatever that fair price is. Simply put, if the US government tried to low-ball AIG, then AIG could simply sell themselves to another buyer at a "fair market price". However, if the US government was the only buyer, then whatever they offered was the "fair market price", as the US government at that time comprised 100% of the market.

The poetic justice of it is absolutely delicious.

 azazel the cat wrote:
No, I don't believe they do.

No, they do. It's in the constitution. Fifth Amendment "nor shall private property be taken for public use, without just compensation."

No, the challenge is in exactly what the fair market price should have been for an insurance group, which is a very difficult thing to determine at the best of times, never mind when that company is on the brink of collapse in the midst of a financial meltdown.

sebster wrote:

 azazel the cat wrote:
No, I don't believe they do.

No, they do. It's in the constitution. Fifth Amendment "nor shall private property be taken for public use, without just compensation."

No, the challenge is in exactly what the fair market price should have been for an insurance group, which is a very difficult thing to determine at the best of times, never mind when that company is on the brink of collapse in the midst of a financial meltdown.

But that's exactly my point: if the entire market consists of a single buyer (the government, as nobody wanted to buy AIG's toxic assets), then that buyer represents 100% of the market. And therefore, they get to dictate what "fair market price" is.

Oh, and for what it's worth, the 5th amendment is the right to not be compelled to testify against yourself, and a few other things

What you think your are referencing, however, is a protection against the government exercising its right to eminent domain. That has nothing to do with an concensual transaction. Here's an example of the difference:


Example 1: The government wants to build a highway through land you own. They can take that land from you, but they are required to pay you a fair market value for that land. This is eminent domain and related to the 5th amendment.

Example 2: You are desperate because your company has failed and you need a massive influx of cash. You offer to sell a portion of your company to the government. The government obliges, and makes you an offer. You have no rights to a fair market price, because the government is not forcing you to sell, as they essentially did in Example 1.

 azazel the cat wrote:
But that's exactly my point: if the entire market consists of a single buyer (the government, as nobody wanted to buy AIG's toxic assets), then that buyer represents 100% of the market. And therefore, they get to dictate what "fair market price" is.

Market price doesn't work like that. There are many, many methods of valuation and they get regularly used even in situations where this only one buyer. Hey, government uses a bunch of different valuation methods in the tax code, to ensure people aren't under and over-pricing assets for tax avoidance shenanigans.

Oh, and for what it's worth, the 5th amendment is the right to not be compelled to testify against yourself, and a few other things

I know what the fifth is, thanks.

What you think your are referencing, however, is a protection against the government exercising its right to eminent domain. That has nothing to do with an concensual transaction.

I know what eminent domain is, thanks. And while it is the most common use of that part of the fifth, there is nothing saying it is the only possible use of that part of the Fifth.

In this situation, given the nature of the crisis at the time, and that it was just the board that agreed to the sale and not a vote of the shareholders, it isn't completely unreasonable for a party to stand up and say 'hang on, the offer we were given was put forward with significant coercion, and was manifestly unfair'.

Now, before you get ahead of yourself, I'm not for one second saying that the government didn't give a fair, or possibly even more than fair price for 80% of AIG. And given the mess management let AIG fall into, requiring the bail out, I think taking the government to court for compensation is incredibly cheeky. But legally there's something there.

sebster wrote:

 azazel the cat wrote:
Oh, and for what it's worth, the 5th amendment is the right to not be compelled to testify against yourself, and a few other things

I know what the fifth is, thanks.

What you think your are referencing, however, is a protection against the government exercising its right to eminent domain. That has nothing to do with an concensual transaction.

I know what eminent domain is, thanks. And while it is the most common use of that part of the fifth, there is nothing saying it is the only possible use of that part of the Fifth.

Apparently not.

nor shall private property be taken for public use, without just compensation

The underlined part is key. "Taken" cannot be a reference to an uncoerced sale, ipso-facto. In no way does the 5th amendment apply to a sale fomented by the seller finding themselves between a rock and a hard place.

AIG would have value whether the Feds bailed them out or not.

And why are we arguing about eminent domain? If AIG liquidated, it would have had value. The suit is about whether that value would be higher than what the Gov paid in the bail out. Is it a stupid lawsuit cause that value was probably less than what the government paid? Sure. But w/e most lawsuits are stupid anyway. This is 'Murica. We don't break tradition here

Surely the board agreed to the terms offered by the government. If the shareholders have a quarrel, it is with the board.

 azazel the cat wrote:

sebster wrote:
I know what eminent domain is, thanks. And while it is the most common use of that part of the fifth, there is nothing saying it is the only possible use of that part of the Fifth.

Apparently not.

No, he does.

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

 azazel the cat wrote:

The underlined part is key. "Taken" cannot be a reference to an uncoerced sale, ipso-facto. In no way does the 5th amendment apply to a sale fomented by the seller finding themselves between a rock and a hard place.

It is well established by US case law that the word "taken" can, in fact, be a reference to a nominally uncoerced sale. Even if that were not the case, it could very easily be argued that the circumstances in which AIG found itself became coercive the moment the government offered bailout funds.

dogma wrote:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

 azazel the cat wrote:

The underlined part is key. "Taken" cannot be a reference to an uncoerced sale, ipso-facto. In no way does the 5th amendment apply to a sale fomented by the seller finding themselves between a rock and a hard place.

It is well established by US case law that the word "taken" can, in fact, be a reference to a nominally uncoerced sale. Even if that were not the case, it could very easily be argued that the circumstances in which AIG found itself became coercive the moment the government offered bailout funds.

The cirucmstances are only coercive if it is found that those circumstances were orchestrated by the party making the purchasing offer (the US government). However, the US government did not create that situation, AIG created that situation. Ergo, there is no coersion.

And if you want to cite an example in US case law that the word "taken" can, in fact, be a referenc to a nimally uncoerced sale, I would appreciate it.

 sebster wrote:
Because while there's no doubting AIG was screwed without bailout money,

An important detail.

the government still has to offer an arm's length, fair market value price for the assets it's taking. So the question is if some other company had come in and offered 180 billion, what's the most likely percentage of the company they could have claimed for that money?

$180 billion... for a company that's screwed if they don't get it? As in, 'out of buisiness, see ya' later, don't bother calling us you loosers!' screwed? As in, 'this company has ZERO value... aside from whatever the pieces will be worth once the bankruptcy courts get done with us'?

Whatever percentage the buyers want, up to and including 100%. Because if the buyer does not get it now, they'll pick up the pieces dirt cheap after the bankruptcy.

But this does solidify my opposition to any future bailouts of Wall Street. Let them go down in flames. THEN the government can step in and create new banks out of the pieces. With new corporate laws. Little things like 'no golden parachutes', 'growth of executive compensation shall be in direct proportion to growth of corporate revenue - not 50X corporate revenue', and 'no bonues for anyone while the business is bleeding money!'

 azazel the cat wrote:
Apparently not.

And at this point I can believe that you, or I can believe the US legal experts who've stated from a purely legal perspective the case has merit and the fifth can apply.

And, as it turns out, so far you're coming a distant second.

Was AIG actually told that they did not have the option to refuse the bailout?

 Vulcan wrote:
An important detail.

In noting that some kind of a deal had to be made, but to try and use it to put forward the notion that AIG had no long term value, as you did, is to entirely ignore the difference between short term liquidity issues and insolvency. AIG suffered the former, not the latter.

$180 billion... for a company that's screwed if they don't get it? As in, 'out of buisiness, see ya' later, don't bother calling us you loosers!' screwed? As in, 'this company has ZERO value... aside from whatever the pieces will be worth once the bankruptcy courts get done with us'?

AIG's immediate problem was that in having their credit rating lowered, they were no longer allowed to hold swap positions without any collateral given to the other party. It meant they needed to find billions of dollars overnight to place with other financial companies, and to find that money in a market in the middle of a liquidity crisis. That is not the same as insolvency.

Note, once again, that I'm not saying AIG was worth more than what treasury paid for it. Given the present equity/share capitalisation of AIG I think that's an extreme stretch. But the point is that a company with an extreme short term credit default is not worth zero, which therefore government can buy out on whatever terms it chooses.

 azazel the cat wrote:

The cirucmstances are only coercive if it is found that those circumstances were orchestrated by the party making the purchasing offer (the US government). However, the US government did not create that situation, AIG created that situation. Ergo, there is no coersion.

That's false. Coercion does not require that a given entity create a set of circumstances, only that said entity takes advantage of them. A particularly poor person, for example, could be coerced into taking out an unfavorable loan without any active force on the part of of the lender beyond a claim that "This loan will improve your circumstances." Similar reasoning applies to AIG and TARP, given the discounted rate at which the preferred stock was purchased, and it is that sentiment which underpins the argument being made by Starr International. More specifically, Starr is claiming that the government consciously told AIG that it wouldn't be bailed out in order to drive down its stock price, and open up its eventual acquisition (at a reduced rate) for use as a means of disseminating bailout funds; an argument that's been made by quite a few people.

Of course, that doesn't mean Starr will win a decision, but the argument is sound enough to elicit a judicial ruling.

 azazel the cat wrote:

And if you want to cite an example in US case law that the word "taken" can, in fact, be a referenc to a nimally uncoerced sale, I would appreciate it.

I'm too lazy to do it right now, if I remember I'll do it later.


Automatically Appended Next Post:

 d-usa wrote:
Was AIG actually told that they did not have the option to refuse the bailout?

No, Starr is arguing that in telling AIG that they wouldn't be bailed out, the government unduly influenced the terms of the eventual bailout.

 dogma wrote:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

God your constitutional law is unreadable.

That's all I had to say about this matter.

Thread is being locked due to thread necromancy.