A very interesting court judgement on the AIG bailout has finally been made LINK1. It is a somewhat mixed judgement, the judge decided that the US state bailout of AIG was to some extent illegal in that the state got hold of all the company and eventually made a profit on the deal. But no money will be payable to stockholders like Hank Greenberg whose shares got wiped put by the state takeover. The reason for no payout is that AIG would have gone bankrupt without the state intervention and the shares would have ended up worthless anyhow. The state bailout was funded at an exceptionally high 14% rate of interest. Another part of the verdict of particular interest was the finding that the AIG bailout was far more onerous than for other firms bailed out by state intervention:
“The Government’s unduly harsh treatment of AIG in comparison to other institutions seemingly was misguided and had no legitimate purpose, even considering concerns about ‘moral hazard,’
There is no doubt that many banks got off fairly lightly, Goldman Sachs was allowed to become a commercial bank (so it could access FEd funds) and go a full payout on its AIG credit default swaps ( a nice little cheque of $8.8 billion) and its competitor Lehman put out of business - very nice treatment if you ask me !
In most countries it is called crony capitalism when the state decides which companies it will bail out and which it will let fail...lets not forget Hank Paulson earnt an estimated $700 million while working at Goldman Sachs and was one of the key decision makers that helped Goldman get such favourable treatment during the crisis.
The full judgement ,makes a great read and is shown below:
“The Government’s unduly harsh treatment of AIG in comparison to other institutions seemingly was misguided and had no legitimate purpose, even considering concerns about ‘moral hazard,’
There is no doubt that many banks got off fairly lightly, Goldman Sachs was allowed to become a commercial bank (so it could access FEd funds) and go a full payout on its AIG credit default swaps ( a nice little cheque of $8.8 billion) and its competitor Lehman put out of business - very nice treatment if you ask me !
In most countries it is called crony capitalism when the state decides which companies it will bail out and which it will let fail...lets not forget Hank Paulson earnt an estimated $700 million while working at Goldman Sachs and was one of the key decision makers that helped Goldman get such favourable treatment during the crisis.
The full judgement ,makes a great read and is shown below:
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