Supplement | HBS Case Collection | April 2013

AIG and the American Taxpayers (B)

by Karthik Ramanna and Matthew Shaffer

Abstract

Explores the decision faced by AIG's board on whether to join shareholder and ex-CEO Maurice Greenberg's lawsuit against the U.S. government. The suit, argued by super-lawyer David Boies (of Bush v. Gore and California Gay Marriage fame), claims that in September 2008 the U.S. arbitrarily set aside the rights of AIG's shareholders—violating the Fifth Amendment by taking private property without just compensation—while preserving shareholder rights in other troubled financial institutions, including Goldman Sachs whose ex-CEO was the then Treasury Secretary. The U.S. government moved to dismiss the case arguing that it has wide discretion in times of crisis, but a federal judge allowed the suit to proceed. The case raises two issues central to understanding capitalism: (1) the importance of and limits to property rights; and (2) the role of the state in choosing between varieties of capitalism, here between oligarchic and entrepreneurial capitalism.

Keywords: Financial Markets; financial institutions; financial policy; property rights; Financial Institutions; Financial Crisis; Financial Management; Insurance Industry; United States;

Citation:

Ramanna, Karthik, and Matthew Shaffer. "AIG and the American Taxpayers (B)." Harvard Business School Supplement 113-125, April 2013.