Congress warns bailout 'poster child' AIG not to sue feds

The PR fallout from AIG’s outrageous decision to consider suing the federal government has reached Capitol Hill, where bipartisan rage is directed squarely at the insurance industry giant.

If you missed it, word leaked out that AIG is considering a lawsuit against the feds over the $182 billion bailout that saved the collapsing company. Stockholders and former company executives say AIG should have gotten a better deal from Washington.

In a letter to AIG Chairman Robert Miller, U.S. Reps. Peter Welch, D-Vt., and Michael Capuano, D-Mass., characterized the insurer as the “poster child” for Wall Street greed, fiscal mismanagement and excessive executive bonuses.

“Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah,” the letter read. “Taxpayers are still furious that they rescued a company whose own conduct brought it down. Don’t rub salt in the wounds with yet another reckless decision that is on par with the reckless decision that led to the bailout in the first place.”

You know you're in trouble when you've reached a point where members of Congress can call you a scoundrel with a straight face and get away with it.

According to Fox News, the mere fact that AIG was considering a lawsuit drew disbelief from economic officials. "We should counter-sue for stupidity," former U.S. Labor Secretary Robert Reich tweeted. 

In widely reported comments, former inspector general for the financial industry bailout Neil Barofsky said AIG joining the suit would be a "giant middle finger" to the American taxpayer. 

"The lawsuit does not argue that government help was not needed," The New York Times reports. "It contends that the onerous nature of the rescue -- the taking of what became a 92 percent stake in the company, the deal's high interest rates and the funneling of billions to the insurer's Wall Street clients -- deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for 'public use, without just compensation.'"

In the end, the U.S. Treasury made $22 billion in profit from the temporary takeover of AIG, which lost 60 percent of its stock value in one day in 2008 as a financial meltdown approached.

The potential lawsuit comes as AIG just finished paying the government back about a month ago, when the Treasury Department announced the sale of its last AIG shares. Last week, AIG launched a TV ad campaign with the tagline "Thank You America" in reference to the bailout.

If you’re still wondering why AIG cratered so emphatically in 2008, consider the competence of a company that spends millions on an ad campaign thanking America and then, just days later, considers suing America.