THE endless and costly litigation regarding the nationalisation at the height of the financial crisis of AIG, the world’s biggest insurer at the time, has always had a Dickensian air. The case, which was initiated in 2011 by Hank Greenberg, AIG’s disgruntled former boss, involves more than 1,600 exhibits, a transcript of 8,812 pages and 442 docket entries. On June 15th the element of farce was heightened when a court ruled in Mr Greenberg’s favour in every respect except the one that matters.
The punitive terms of AIG’s bail-out involved “plain violations of the Federal Reserve Act”, Judge Thomas Wheeler of the Court of Federal Claims decided. Yet, “If the government had done nothing, the shareholders would have been left with 100 per cent of nothing.” In other words, Mr Greenberg is right to question the legality of the government’s actions, but wrong to expect compensation.
Mr Greenberg had sought damages in “excess of $40 billion” on behalf of Starr International, AIG’s largest shareholder, which he controls. He has already said he will appeal. The government, too, may want to appeal to clarify its authority to rescue struggling financial firms and to ward off more lawsuits challenging its conduct during the crisis—especially from the shareholders of Fannie Mae and Freddie Mac, two government-backed mortgage giants it also took...Continue reading
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