By Vicki Needham - 01/08/13 09:09 PM EST
Democrats responded with outrage Tuesday to reports that insurance giant American International Group (AIG) might sue the federal government over the terms of its 2008 bailout.
Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) called the potential $25 billion shareholder lawsuit "outrageous" and "unbelievable."
"Taxpayers across this country saved AIG from ruin, and it would be outrageous for this company to turn around and sue the federal government because they think the deal wasn't generous enough."
Cummings, ranking member of the House Committee on Oversight and Government Reform, said the lawsuit would be "an unbelievable insult to our nation’s taxpayers, who cleaned up the mess this firm created."
"The American taxpayers were a lifeline to this firm, and for certain shareholders to now criticize the terms of the rescue is utterly ridiculous,” he said.
In a terse letter to Robert Miller, board chairman of the American International Group, Reps. Michael Capuano (D-Mass.) Luis Gutierrez (D-Ill.) and Peter Welch (D-Vt.) said the company would quickly become "the poster company for corporate ingratitude" if board members took that step.
"Don’t even think about it," the lawmakers wrote Tuesday. "AIG became the poster company for Wall Street greed, fiscal mismanagement, and executive bonuses – the taxpayer and economy be damned. Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah."
According to numerous reports, AIG's board is meeting Wednesday to discuss whether the company, which took a $182 taxpayer-funded bailout, will sign on to a $25 billion suit, initiated by the firm's former CEO, seeking compensation for shareholders allegedly harmed when the government took over the collapsing company in 2008.
Maurice "Hank" Greenberg, who headed AIG for decades before stepping down in 2005, alleges — among other things — that the government charged onerous interest rates as the company was paying back its taxpayer-funded bailout loan. Greenberg sued the government in 2011 and is urging his former company to get on board.
The possibility that AIG could join the lawsuit comes as the insurer has launched an advertising campaign thanking taxpayers for the support. In the spot that began airing this year, AIG employees tell their company's story and thank taxpayers for the bailout, which the commercial says was paid back.
Capuano and Welch did not threaten any specific action if the AIG board joins the suit, but warned that the public backlash would be severe.
"Taxpayers are still furious that they rescued a company whose own conduct brought it down," they wrote. "Don’t rub salt in the wounds with yet another reckless decision that is on par with the reckless decisions that led to the bailout in the first place."
Warren argues that the insurer was able to recover from $2.2 billion in losses in 2010 and reap $17.7 billion in profits the next year because of special tax breaks from the Treasury Department.
"When a company accepts a taxpayer bailout to stay in business, it ought to follow the same tax laws followed by companies that aren't bailed out," Warren wrote in a Washington Post op-ed with other members of the Congressional Oversight Panel in March 2012.
"In its ongoing efforts to reform corporate tax law, Congress should close this egregious loophole and prevent AIG from continuing to receive a stealth bailout every time it files its taxes," she said.
Although White House spokesman Jay Carney would not comment directly on the lawsuit, he highlighted the Obama administration's push for the Dodd-Frank financial reform law.
"Thanks to the action of the president, thanks to the action of the administration and Congress, an action like the kind that was taken to deal with AIG’s potential disorderly failure, however necessary during the financial crisis, should not happen again, and that’s why this president pursued Wall Street reform," Carney said Tuesday.
"And that’s why it is essential to continue to move forward with the implementation of that reform."
—This story was posted at 1:14 p.m. and last updated at 6:09 p.m.
Mike Lillis contributed to this story.