Maurice Greenberg, the former CEO (and major shareholder) of AIG, the insurance giant that was on the brink of bankruptcy before being bailed out by the government in 2008, is suing the government, demanding billions of dollars in compensation.
Why? Greenberg claims that “the government ripped him and other stockholders off by failing to negotiate more generous terms when it took nearly 80 percent equity in the firm, diluting their stakes”.
Greenberg’s suit ignores the fact that if the firm had gone bankrupt, his shares would have been worth nothing (or close to it). It also ignores the fact that the whole reason AIG was in trouble was because of its own risky and irresponsible behavior. AIG extended their guarantee to securities backed by sketchy subprime mortgages, which famously blew up, bankrupting a number of banks (including Lehman Brothers). The government stepped in because AIG was “too big to fail” — its collapse would have imperiled the world economy.
If you ever wanted an example of what’s wrong with our financial sector, this is it. Capitalism is a dance between risk and reward. The higher the potential reward, the higher the risk of losing your money. But the banking industry isn’t actually taking any risks because they expect to get bailed out. This means that there is no incentive to act responsibly with our money and our economy.
And this lawsuit takes it one hypocritical step further. Not only do they expect to get bailed out, but they have the chutzpah to demand more money.
There is only one solution. We need to break up every financial institution that is “too big to fail”. That way we can let them fail when they make stupid and irresponsible decisions.
The GOP claims to be the party of personal responsibility. They oppose a social safety net because they claim that it provides a disincentive to work. Where are they on this issue?
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Many have been asking why no senior financial sector executives ever faced criminal prosecution for their actions leading up to the crash in 2008. Do we finally have a volunteer? I hope so.
Unfortunately, Greenberg would be a poor volunteer. He cleverly stopped being CEO before the shit actually hit the fan.
But your question still stands.
I agree with your argument 100% IK. Millions of little guy’s took it on the chin during the meltdown, but the political contributors seemed to be largely unscathed.
Correction: little guys are still taking it on the chin.
I’m about to sell my home purchased in 2007 at a $45,000 loss. Where’s my bailout? I can’t even claim the loss on my taxes!
TJ – I feel your pain. I tried to refi a couple years ago and was told I no longer qualify for the mortgage I already have. (huh?) The big bank sadi the only way they could help was if I stopped making payments. (huh again?) when I asked if that effect my 700+ credit score they said yes, and when I asked if that would effect my ability to get a loan they said yes. (too many huh’s) What a load of crap.
Also,
Look into turning your house into a rental property and then sell it next year. You’ll have a capital “loss” instead of gain next year, which should lower your tax. Ask a PI contributer who knows more about this then me. EBDOUG you out there?
I saw that, but the gain or loss is based on the value of the house the day you convert it to a rental property, not your original purchase price. As bad as it is, the value has basically stabilized so I don’t think it’ll lose much more value.
“The GOP claims to be the party of personal responsibility. They oppose a social safety net because they claim that it provides a disincentive to work. Where are they on this issue?”
The Democrats claim to be champion of poor and middle class people. Where are on they on this issue? How many Wall Street CEOs are in jail or tried by Eric Holder? How many companies Obama let fail? Why he bailed them out as well, like Bush before?
1 word Anonymous…. contributions
The “ANONYMOUS” above is me, not sure why it posted me as such.
-Hassan (in case it shows me ANONYMOUS again)
Well, Obama bailed out the auto industry, and we owned a big chunk of GM for the trouble. Living in a Plutocracy really sucks unless you are one of the oligarchs.
So perhaps what we should do is disqualify any institution that does stock trading from FDIC and the next time they fail nationalize them after bankruptcy where we take back all the goodies that the rats bailed wit.
Holder is one of the original “the rich wouldn’t do well in prison” advocates. I won’t miss him when he’s finally gone. Bet he has a multi-million dollar “job” waiting for him.
Truth be told, the automobile industry bailout was passed during the last days of the Bush administration, although it WAS also supported by (then) President-elect Barack Obama. http://www.politico.com/news/stories/1208/16740.html
Does anyone seriously believe allowing GM and Chrysler to go bankrupt would have been a good idea? OR the big banks?
The difference between the auto companies and the banks is that, the auto industry was a victim of the economic downturn while the banking industry perpetrated it. When I bought my first home, the bank required verification of income including a call to my employer. NOT doing so is irresponsible and not close to an honest definition of diligence.
Jon, what is “Quantitative easing”, and who is beneficiary of that? Is that still going?