As public fumes, AIG says will not sue US over bailout

Facing anger from Congress and the American people, AIG Inc said it would not sue the U.S. government over terms of the company's multi-billion dollar bailout.

Insurer American International Group had been weighing whether to join a lawsuit filed by its former Chief Executive Hank Greenberg and his company Starr International, which owned 12 percent of AIG before its $182 billion rescue that started in 2008.

Greenberg claims the rescue was unfair to shareholders and that the Federal Reserve Bank of New York charged an excessive interest rate on its initial loan. He is seeking billions of dollars in damages. AIG said its board had carried out its legal and fiduciary duty to consider joining Greenberg's lawsuit before making its decision. Greenberg has a case pending in the Court of Federal Claims in Washington, D.C., and is also appealing the dismissal of a lawsuit in the federal court in New York. AIG's Chief Executive Bob Benmosche said in an interview with CNBC that ultimately the public had to trust the company. "It is not acceptable socially for AIG to have taken this money and to think we can go back and sue the government," Benmosche said.

AIG said it would not pursue Starr's claims nor would it allow Starr to pursue them on AIG's behalf, setting the stage for a fresh legal fight between Greenberg and the company.

The idea that AIG might sue the government struck a raw nerve with the public, which took to the Internet to vent its anger at what it viewed as the company's audacity. The volume of AIG mentions on Twitter rose more than 50-fold, according to Topsy Analytics.

Starr's attorney, David Boies, said in a statement that AIG's effort to block Starr from pursuing claims was contrary to shareholders' interests. "Whether or not the AIG Board will be successful in blocking Starr's efforts to recover damages for their shareholders will ultimately be decided the Court," Boies said. Former Obama administration adviser Austan Goolsbee said "GO SCREW YOURSELVES" in a multi-tweet tirade. Comedian Andy Borowitz drafted a mock letter from the company to taxpayers, asking for more bailout money to pay for the cost of the lawsuit. Dozens of obscene comments made descriptive references to the anatomy of Chief Executive Robert Benmosche.

And those were the gentler barbs. The New York Daily News ran an editorial cartoon in which a lifeguard saves a drowning man with "AIG" on his belly. When the lifeguard asks the man how he feels, the victim says, "Like suing you." The vitriol was just like it had been in late 2008 and early 2009 when, with the United States deep in recession, AIG employees hid ID badges and their families were threatened amid an uproar over bonuses. A group of congressmen led by Vermont Democrat Peter Welch.