AIG Bites the Arm That Fed It

There’s a moment in Mordecai Richler’s novel, The Apprenticeship of Duddy Kravitz, in which a Montreal old-timer rapturously recalls the early rise of a shady neighborhood businessman:

“All that time he’s collecting streetcar transfers off the street and selling them, see. Nerve? Nerve.”

Yesterday Americans began reading about a different kind of business nerve. According to the New York Times and other sources, American International Group, the insurance titan and poster child for government bailouts of the financial sector, is considering suing the very government that loaned it $182 billion. AIG’s legal thinking is that, while it was all very good of the Treasury Department and Federal Reserve Bank of New York to come to its rescue, the terms of that rescue inflicted unfairly high losses on the company’s shareholders.

All this comes during a publicity campaign in which AIG has been thanking Americans for saving its skin during the 2008 economic meltdown that led to a long recession. (AIG recently emerged from government control, after repaying the $182 billion, plus interest.)

The company’s gratitude has been splashed across national newspapers, although AIG had no choice but to acknowledge its rescue: Without government aid, AIG would be sleeping with the fishes today. Just because AIG suffered a little tough love from its government handlers in 2008 doesn’t mean the feds’ bailout terms weren’t sensible. As the Washington Post’s Neil Irwin put it:

“The message the government was sending with the onerous terms was clear: If you run a company into the ground, and have to come to Uncle Sam for help, we will help you only reluctantly and at a high cost. If you don’t like it, well, you can join Lehman Brothers in bankruptcy court.”

Forbes’ Steve Schaefer began a column about the suit with the line, “Talk about biting the hand that fed you,” but this is really more a case of biting the arm that fed you. And, on second thought, such a lawsuit isn’t even a matter of corporate “nerve,” the Wall Street equivalent of picking up streetcar transfers off the ground to resell. It’s pure chutzpah.