I forgot how this thing works. Since I’ve last written, I took the CFA exam again, we’ve had fiscal cliffs, an election, and all sorts of other stuff. I meant to write a post called “All I want for Christmas is not to go over the fiscal cliff…” but alas, holiday season intervened.
Regardless, there’s some news that came out earlier this week that the former CEO of AIG, Maurice Greenberg, was going to sue the Federal Government for parts of the bailout. Among them were the was a high 14% interest rate that they had to pay on funds and the fact that the previous shares were diluted when the government provided the funds.
Thankfully, AIG has decided not to partake in the lawsuit.
The complexities in this case can not all be explained in the space I have here. One thing I do want to say is that I’ve been against bailouts in general. I don’t see why taxpayers should have to front the bill for bad business practices, no matter how bad the economy will go down if a corporation goes bankrupt.
That being said, AIG’s bailout was good for both the firm itself, government, and to an extent, taxpayers! How is it good for government and taxpayers? Very simple. They made a profit. Our government is still heavily in debt and I see us approaching another debt ceiling before we actually get our ducks in a row, but this at least helps. Additionally, the country (and the world) does not have to endure the economic pains of a major financial institution going under.
For AIG, they still exist. They did not file bankruptcy. Share prices are not only higher than they were back in 2008, but the company itself is in another position. I’d considering actually owning this stock now. I mean, PE at under 3 for that big of a firm?
And now the former CEO is complaining that he didn’t get enough. Yay America.