A.I.G. might sue the U.S. government for saving it

You’ve got to hand it to some of these high finance guys—their audacity knows no bounds. (And I don’t mean just thinking they can rap.)

In case your memory is foggy here’s how the A.I.G. bailout went down: Back in ’08 A.I.G, an insurance company, had sold “credit default swaps”—which are a weird form of insurance policy for investors against companies going bankrupt—to every Wall Street firm out there and god knows who else. After Lehman Brothers went bankrupt and the financial world went into tailspin, it looked like all kinds of firms could go under—so many that if they did, A.I.G. wouldn’t have enough cash to cover the insurance payouts it owed on all the credit default swaps it had sold. If that happened and A.I.G. suddenly went bankrupt all the Wall Street banks A.I.G. owed would lose billions, and if that happened they’d drag each other down and pretty soon the whole country would start looking like the bank-run scene in “It’s A Wonderful Life.” Not good.

So the government came in and bought $182 billion worth of A.I.G. stock—enough to cover the payouts it might potentially need to make and enough to restore confidence in the financial world and prevent a systemic collapse. Last month the government finally sold the last of the A.I.G. stock it had been holding, to a handsome profit—as much as $22 billion, although some insiders say this figure is misleading.

Anyway, while plenty of taxpayers were sore about it at the time, the government pretty much saved the day. The only other option for A.I.G. was bankruptcy, which would have meant disaster for everyone else. And now according to New York Times the board of A.I.G. is considering suing the U.S. for it.

The gripe seems to stem from that supposed $22 billion in profit. Former A.I.G. CEO Maurice R. Greenberg, who resigned in 2005 amid an accounting scandal (of course) filed a lawsuit alleging that the government had taken advantage of the company with a “punitive” interest rate north of 14% and that it had unfair influence in seeing that they actually paid out the billions that they owed. Both of these things supposedly took money away from A.I.G. shareholders that they could have just kept for themselves. (Except they couldn’t, cuz they were going bankrupt, remember?)

“The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency,” the lawsuit says.

Except it seems to forget that A.I.G. willingly accepted the government’s terms to get the cash. A New York judge rejected the case saying A.I.G “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.” He said the suit “paints a portrait of government treachery worthy of an Oliver Stone movie.”

A Washington, DC judge has agreed to hear the case, however, so lawyers from Mr. Greenburg’s new company will gather at A.I.G.’s offices on Wednesday to try and persuade the the current board to join in on the lawsuit. Defense lawyers from the Justice Department will also be present to try to persuade them the lawsuit is ridiculous.