In A.I.G. Case, Surprise Ruling That Could End All Bailouts

[KamaAina]

http://www.nytimes.com/2015/06/16/business/dealbook/surprise-ruling-finds-bailout-shorted-aig.html

All that did come to pass in one case: the bailout of the American International Group, the large insurer and symbol of the crisis. Yet on Monday, a judge in Washington decided that the government’s actions were too severe, and the rescue was illegal.

When the Federal Reserve propped up A.I.G. in September 2008, unlike its approach with most of the big banks, it threw out the company’s chief executive and took control of 79.9 percent of the company, nearly wiping out many of its shareholders. Taxpayers got all of their money back, and then some, receiving a profit of more than $20 billion.

But in a stunning ruling, Judge Thomas C. Wheeler of the United States Court of Federal Claims said on Monday that those terms were too “draconian.” In other words, he suggested taxpayers should have offered A.I.G. a more generous deal.

The judge’s decision could have far-reaching consequences should another financial crisis occur — and if history is any guide, one will. Legal experts say that the ruling, coupled with certain provisions of the Dodd-Frank financial overhaul law enacted after the crisis, makes it unlikely the government would ever rescue a failing institution, even if an intervention was warranted.

[Erich Bloodaxe BSN]

1. Good.

There shouldn't be 'too big to fail'.

[TexasTowelie]

2. I actually profited nicely on the AIG mess.

I held stock in a company that was a counter-party to the AIG derivatives contract so while AIG was about to go under the stock tripled. I saw that the housing market was over-inflated back in 2003 and when I had a chance to make some money in 2004 I invested in that stock. It was probably the best financial move I ever made.

[gratuitous]

3. Isn't the Federal Reserve a private entity?

Despite its government-sounding name, isn't the Federal Reserve actually a private entity? Because I'm pretty sure I wasn't consulted on the subject of bailing out these financial miscreants. My feeling was more in line with that sign someone had saying "JUMP! YOU FUCKERS!"

We'll see if Judge Wheeler's ruling holds up through the appeals process.

[Sanity Claws]

4. I don't get the conclusion

Isn't the logical conclusion that next time Around better terms will be offered to the institution that's too big to fail? Logical insofar as our government is owned by these bastards.