Judge: Feds overstepped with AIG bailout

[PoliticAverse]

Source: The Hill

A court ruled Monday that the federal government was “unduly harsh” in its takeover of AIG during the financial crisis, but refused to award the company’s former head any damages.

The ruling draws to a close the high-profile lawsuit against the federal government, brought by Maurice "Hank" Greenberg, the former head of the insurance giant, and other AIG shareholders under the umbrella of Starr International.

In his ruling, Judge Thomas Wheeler determined the federal government violated the Constitution by stepping in and effectively seizing the insurance company during the crisis, even if the takeover was intended to save the company from imminent bankruptcy.

However, since AIG would have ceased to exist almost immediately had the government not stepped in, the judge also determined that Greenberg and the shareholders were not due the billions of dollars in damages sought.

Read more: http://thehill.com/policy/finance/244998-judge-government-overstepped-in-aig-bailout-but-wont-pay-penalty source

[JustAnotherGen]

1. My 'rec' is because

They aren't going to get one more thin red cent of our money. Shame on them!

[Erich Bloodaxe BSN]

2. So I guess the gov't shouldn't have 'stepped in'.

However, since AIG would have ceased to exist almost immediately

As Republicans keep telling us, they'll never learn from their mistakes if you keep bailing them out...

[FBaggins]

3. That raises a very interesting question

As I read the summary, the government acted outside of its constitutional powers, but AIG is not owed any damages because the government's actions did not result in actual damage to AIG...

... so what about those of us who were damaged by those unconstitutional actions?

[geek tragedy]

4. if you can show that you personally suffered harm as the result

of the AIG bailout, you would have standing to sue. But generalized claims of harms to taxpayers do not give rise to standing in such lawsuits.

[rhett o rick]

6. In other words, frack the 99%. nm

[FBaggins]

10. There are some other banks that might be able to make that showing

If some of those giant banks had been allowed to go under... how much business would have been picked up by the banks that didn't screw up so badly?

[geek tragedy]

11. That would be speculative at best--AIG wasn't a bank, it was a counterparty on CDS/swap

transactions. So not a direct competitor.

If it had gone other, that would have blown trillions of dollars of holes in the balance sheets of just about every bank.

So, realistically those other banks would have been screwed had AIG capsized.

[FBaggins]

14. Of course it's speculation

Thus the word "might"

But AIG not being a bank doesn't strike me as all that relevant. Was there something in the ruling that said that seizing control of the company was unconstitutional because they were an insurance company?

[geek tragedy]

15. yes. Banks can be seized by the FDIC. Insurance companies can't. nt

[Agony]

17. AIG isn't "just" an insurance company

AIG is a Savings and Loan Holding Company previously overseen by the Office of Thrift Supervision and now by the Board of Governors.

break the fucking thing up.

[Yupster]

27. Someone who was shorting AIG stock

would be able to show damage.

GM bondholders certainly were damaged by the federal role in the GM bankruptcy. Supposedly a teacher pension fund sued, but I've never heard where the case went.

In my opinion it was a pretty open and shut case but I don't know if it's still alive or not.

In that case the GM bondholders overwhelmingly rejected GM's reorganization proposal, and then the government stepped in and enforced basically the same proposal anyway without the bondholders ever getting another vote.

[lonestarnot]

5. What a bullshit ruling!

At least they didn't get any more of our money.

[Chakab]

7. Fucking ridiculous. The notion of the entire suit was offensive. Greenberg was suing for compension

because he claimed that the government mishandled AIG's share value after he and his genius employees ran the company into the ground and nearly blew up the world economy.

These Wall Street assholes are out of control, and there are a bunch of corporate shills sitting on court benches who have no business wearing a black robe.

[geek tragedy]

8. This raises the question of if there was zero damages, why did Greenberg have standing in the first

place?

[Chakab]

9. Standing doesn't seem to be an issue when the suit can be placed in from of a friendly judge who

wants to make a political ruling.

Look at King v. Burwell. That nonsense made it all the way to the Supreme Court, and none of the plaintiffs are actually in a position to be harmed by the ACA.

[MFrohike]

21. Two separate issues

He had standing as a shareholder of AIG who alleged that he'd suffered an unconstitutional taking. The fact that the organic law doesn't permit him to collect damages is irrelevant to that.

[geek tragedy]

22. But injury is necessary for a case and controversy.

If he can't even claim damages he doesn't have standing.

[MFrohike]

24. He did

He alleged an unconstitutional taking. The court didn't feel he was able to prove his case, but the requirement is a colorable claim, not a slam dunk. If being right before the fact was a requirement to bring a case, there'd be virtually no litigation.

[geek tragedy]

25. But this was a loan, not a seizure.

AIG had the option of saying "no."

[MFrohike]

26. Not really

It had the form of an illegal loan (illegal because the Fed took equity in AIG), but it wasn't a loan in any conventional sense. The money wasn't used to keep AIG functioning while it could renegotiate terms with its counterparties in the CDS market. The money was used to pay those counterparties in full so as to disguise their own insolvency. Goldman, in particular, would likely have failed without that injection of cash to hide the true state of its balance sheet. Paulson, Geithner, and Bernanke moved heaven and earth to expedite Goldman's conversion to a bank holding company while evading necessary requirements like solvency. They were only able to do this because they'd funneled billions into Goldman to keep it afloat until it could access the Fed's overnight window as a bank holding company. The commercial banks also benefited from this scheme, as they also received quite a bit of cash from the initial $85 billion lending facility.

AIG did have the option of saying no. They'd probably have been taken over regardless because AIG was only important so far as it was useful to recapitalizing the banks without being seen to do so. All they'd have gotten for the no was the boot and a tonn of lawsuits over their breach of fiduciary duty. It's not real hard to choose to do business with the egregious terms the Fed offered when you're staring personal bankruptcy in the face.

[jwirr]

12. If I am not mistaken AIG was the one insuring the banks and their loans. The government stepped

in because this to would have brought the banksters down.

[SwankyXomb]

13. "The Constitution is not a suicide pact."

If the government hadn't stepped in, AIG would have gone down and taken the world economy with it. Just more proof that it's all mine mine mine for the 1% and fuck everyone else.

[dixiegrrrrl]

16. Very Solomon of the judge.

Seems Greenberg, like Lehman's Dick Fuld, has a hard time recognizing his company really did die.

[Angel Martin]

18. only in America

only in America could the CEO who destroyed a trillion dollar insurance company imagine he is a victim.

the gov't put over 180 BILLION dollars into this stupid company.

that's about what Fannie and Freddie got between them.

now it is true that both bailouts eventually made money, but the gov't risked hundreds of billions of tax dollars to bail out wall street idiocy.

[wolfie001]

19. At least this slimeball didn't receive any money for his "troubles"

The taxpayers should be the ones awarded damages from these clueless fucksters.

[PoliticAverse]

20. Followup: Ex-AIG CEO still wants damages in bailout case, will appeal

http://www.democraticunderground.com/10141119564

[MFrohike]

23. Good decision

The AIG bailout was nothing more than a money laundering scheme meant to conceal the fact that the investment banks were insolvent. Geithner and Bernanke exceeded their powers under law and I'm glad they had to admit their bullshit scheme on the stand. I'm even more thrilled that Greenberg didn't get squat because he's a conniving scumbag.

The narrative that this is about ungratefulness is bullshit. Greenberg took advantage of the fact that incompetent, unscrupulous morons were running the Fed and broke the law in their effort to save the guilty. They should have let the investment banks collapse, put the failing commercial banks into resolution, and let the established processes play out. Instead, they chose to lie that there was no alternative and toss trillions in free cash to their banker buddies. Anyone who actually believes that what they did was necessary is a fool. FDIC has been dealing with failed banks since the Depression. This was a frantic effort to keep their ideology intact, not the desperate, but rational act of someone with a clue.

[Gothmog]

28. I am glad the Greenberg was not awarded damages