Facing anger from congress and the American people, AIG has decided not to sue the US government over terms of the company's multibillion dollar bailout.
The insurer had been weighing whether to join a lawsuit filed by its former chief executive Hank Greenberg and his company Starr International, which owned 12 per cent of AIG before its US$182 billion (Dh668.52bn) rescue that started in 2008.
Mr 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.
On Wednesday, AIG said its board had carried out its legal and fiduciary duty to consider joining Mr Greenberg's lawsuit before making its decision. Mr Greenberg has a case pending in the Court of Federal Claims in Washington and is also appealing the dismissal of a lawsuit in the federal court in New York.
"It is not acceptable socially for AIG to have taken this money and to think we can go back and sue the government," said Bob Benmosche, the AIG chief executive.
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 Mr 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 on Tuesday, according to Topsy Analytics.
Starr's attorney, David Boies, said 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 by the court," said Mr Boies.
The former Obama administration adviser Austan Goolsbee unleashed a multi-tweet tirade. The 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 Mr Benmosche's anatomy.
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 the Vermont Democrat Peter Welch sent AIG's chairman a letter late on Tuesday, advising: "Don't do it. Don't even think about it." Other members of Congress threatened hearings.
AIG took to Twitter to defend itself, saying it was legally obligated to at least consider action.
The US government rescued the company from the brink of bankruptcy in September 2008 with a bailout that ultimately topped $182bn. After a recapitalisation deal closed in early 2011, the US Treasury owned 92 per cent of AIG.
The Treasury sold the last of that stake last month. The government has said it earned a return of $22.7bn on the rescue.
In a statement, the Obama administration welcomed AIG's decision.
"AIG ran a careful process and the board's decision not to join Starr International's lawsuit is the right result," said the assistant Treasury secretary Timothy Massad.
"We continue to believe that Starr's case is without merit and will continue to defend our actions vigorously."
AIG shares rose 0.3 per cent to close at $35.76 on Wednesday. The stock lost half its value in 2011 but then rose more than 50 per cent last year as it showed consistent profitability.