After Lehman declared bankruptcy and the government did not move to bail out the company, I noticed a little-remarked story that AIG had refused an infusion of private capital because it came attached with the price tag of yielding control of the company. Here are the details from a more recent report:
AIG turned down a capital infusion from a group of private-equity firms led by J.C. Flowers & Co. because an option tied to the offer would have effectively given them control of the company, an 89-year-old giant that does business in nearly every corner of the world. Other private-equity firms also floated various options in helping the company.
Now the Fed has essentially bought the company, which will result in replacing existing management, which makes it unclear why the government backing was that much more acceptable than the private investment. It is even more unclear why the Fed found it acceptable for AIG to reject a private takeover that would have apparently made the government support unnecessary. Of course, AIG could say that it is within its rights to turn down private money, but it seems to me that it was in no position to refuse assistance and then cry for help from the government.