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AIG, saved by US bailout, now considers suing US government

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One legal action is led by former AIG chief Maurice "Hank" Greenberg, alleging that shareholder rights were violated by the government – such as by charging exorbitant interest on credit extended to keep the firm afloat. After a federal judge in Manhattan dismissed Mr. Greenberg's suit in November, it is being appealed, while a similar suit is still pending in the US Court of Federal Claims, Reuters reports.
 
The bailouts of specific corporations during the financial crisis were deeply unpopular with American public. AIG became the poster child for the problem, because of the firm's large executive bonuses and because more than $180 billion in taxpayer funds were deployed to prop up the company and its business partners.
 
By some standard theories of finance, any rescue of private banks and corporations during a crisis should not be too soft on investors and managers of those firms. Government officials are acting as a "lender of last resort," providing credit that helps the firms when no one else will. Whether that service is provided by taxpayers or by a central bank, the government deserves to be well compensated for providing that service, the argument goes.
 
Imposing terms such as high interest rates may also help to deter risky behavior by financial firms in the future.

The US Treasury, for its part, has asserted that the bailouts of banks and firms like AIG largely worked. They helped to prevent the financial crisis from deepening, and much of the money has been paid back.

"Taxpayers have recovered nearly $375 billion – or nearly 90 percent – of the $418 billion in TARP funds disbursed to date," the Treasury said in a November report to Congress. Since then, the AIG rescue has concluded, as the Treasury concluded the sale of an equity stake in the firm, which it had taken as part of the rescue package.

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