The New York Times is reporting that American International Group , better known as AIG, is considering joining in a shareholder lawsuit against the federal government. The allegation? In bailing out the giant insurer in 2008, the federal government "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.'" 

Talk about cheek. The American taxpayer should rightly see this as a slap in the face for coming to the rescue of the company Fed chairman Ben Bernanke once described spot-on as a hedge fund attached to an insurance company: a bizarre combo that should never have existed, and driven to the edge of bankruptcy due solely to its own missteps.

AIG shareholders, and shareholders everywhere, should be outraged: This is the kind of thing that gives corporations and the stock market a bad name.


Oh, the gall of it all
The suit doesn't contend the necessity of the bailout, but rather the way in which it was carried out. Taking a 92% stake in the company "diluted the holdings of existing shareholders," so the filing goes. And the 14% interest rate attached to the bailout funds was "punitive."

The suit has been in the works since 2011, and was initiated by Maurice Greenberg. Greenberg was CEO at AIG for nearly 40 years, until he resigned in 2005 over an accounting scandal. He has since remained, however, a major stockholder. Greenberg filed the suit in two jurisdictions: New York City and Washington, DC. The judge in New York threw the suit out, but the Washington, DC judge is awaiting Greenberg's next move.

That next move is to try and persuade AIG's board to sign on, which Greenberg will attempt tomorrow. After Greenberg makes his presentation to board members, the Department of the Treasury and the Federal Reserve Bank of New York -- the two defendants in the case -- will make theirs. Greenberg is asking for $25 billion on behalf of the shareholders he represents.

 Nothing says "thank you" like a lawsuit
So why would AIG's board even consider signing on? "The AIG board of directors," company spokesperson Jon Diat said in a statement, "takes its fiduciary duties and business judgment responsibilities seriously."  

So maybe board members feel they have to at least entertain the notion of this lawsuit, to appear they're fulfilling they're fiduciary responsibility to shareholders. More likely, there's some fear for their jobs. Greenberg seems a force to be reckoned with. Perhaps they worry that if they don't come across as somewhat receptive to the suit, Greenberg will muster votes to bring them down.

According to The New York Times, there's no indication which direction the board is leaning on this issue.  My guess is they'll listen attentively to the presentation and politely decline Greenberg's offer. Members must be appalled. The majority were appointed after the bailout. And the new CEO, Robert H. Benmosche, has generally been well regarded in his role: reorganizing the insurer, and refocusing it back toward its core business. Recently, AIG even launched a national ad campaign, thanking the country for the $182 billion dollar bailout. How could it then turn around and sue the government, and maintain any kind of credibility with the American public otherwise?

Presumably, other financial institutions that were bailed out at the height of the financial crisis could make a similar case as the one AIG is pondering. Bank of America , Citigroup , and JPMorgan Chase -- just to name a few -- all received large capital injections on terms generous to the federal government. While AIG was unarguably in the worst shape of all (barring Lehman Brothers), each of them benefited from the government money -- at the very least by virtue of the fact that the bailout money brought much-needed stability to the financial system as a whole. But if there's been any kind of similar suit brought by these or any other bailed-out banks against the federal government, I haven't heard.

I grew up very working class. And it wasn't all that long ago I still believed the stock market was exclusively for the wealthy. Now, of course, I know better. I know that the stock market is also for the middle class: that people's retirements, their kids' college funds, and a world of other worthy causes ride on the performance of millions of portfolios out there. But it's news like this, that gets very widely reported (I spotted this on the home page of The New York Times online), that gives shareholders a bad name and the wrong reputation. AIG shareholders who aren't aligned with Greenberg should make their voices heard, for everyone's sake. 

But this event, or non-event, as it may turn out to be, isn't the last word when it comes to AIG. After bringing the financial world to its knees, most investors are wary about owning a stake in AIG today. Let The Motley Fool fill you in on both the reasons to buy and reasons to sell AIG in this new report. We'll also tell you what areas AIG investors need to watch going forward. Just click here now for instant access.

The article AIG and the Slap Heard Round the World originally appeared on Fool.com.

Fool contributor John Grgurich owns no shares of any of the companies mentioned in this column. Follow John's dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich . The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group, Bank of America, Citigroup, and JPMorgan Chase, and has the following options: Long Jan 2014 $25 Calls on American International Group, The Motley Fool also has a delightful disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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