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Ex-AIG CEO Sues U.S. Government For Taking Over AIG
By
Jen Chung
Published Nov 21, 2011
Modified Nov 21, 2011
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By
Jen Chung
Published Nov 21, 2011
Modified Nov 21, 2011
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If your stomach can handle it, think back to 2008 when there was panic about Wall Street banks, in the wake of Lehman Brothers' bankruptcy. The government gave insurance firm AIG an $85 billion loan in exchange for a 79.9% stake in the company, to prevent it from collapsing and taking other institutions with it (see: Too Big To Fail). Well, now former AIG CEO Maurice "Hank" Greenberg is suing the government, claiming the takeover was unconstitutional and that the "Fed breached its duty to A.I.G. shareholders when it unwound the company’s disastrous bets on mortgage securities," the NY Times reports.
According to the Wall Street Journal, "Starr International Co., a firm headed by Mr. Greenberg that was AIG's largest shareholder at the time, filed a lawsuit Monday in the U.S. Court of Federal Claims. The action accuses the U.S. government of using the giant insurer as a vehicle to ship cash to AIG's trading partners. The court has jurisdiction in cases involving claims against the federal government," claiming that the government "took valuable property from Starr and other AIG shareholders in violation of the Fifth Amendment, which says that private property can't be taken for 'public use, without just compensation.'"
Greenberg and Starr are suing the government as well as the New York Fed. His lawyer, David Boies, said, "What these lawsuits say is that in our country, not even the government, is above the law. When the government takes action, although it has enormous power, there are legal limits to what they can do. One of those limits is that they cannot take private property even for a good purpose if they do it in violation of legal protection or don’t give just compensation."
The Treasury Department said, "It is important to remember that the government provided assistance to A.I.G. — and stopped it from collapsing — in order to prevent a meltdown of the entire global financial system. Our actions were necessary, legal, and constitutional. We are reviewing the lawsuit and expect to defend our actions vigorously."
Tagged
AIG
federal government
hank greenberg
lawsuit
Maurice greenberg
too big to fail
Jen Chung
Jen Chung is a former WNYC and Gothamist editor.
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