Fannie Mae-No Politics (FNMA)

[Mikey Mike]

Government had no right to take 80% in AIG bailout: Greenberg lawyer

April 22, 2015

By Mark A. Hofmann


Former AIG Chairman Maurice R. Greenberg.

WASHINGTON — The federal government did not have the authority to demand nearly 80% of American International Group Inc.’s equity in return for financial assistance during the 2008 financial crisis, an attorney for AIG investors, including former AIG chief Maurice R. Greenberg, told a federal judge Wednesday.

In closing arguments before Judge Thomas Wheeler in the U.S. Court of Federal Claims in Washington, David Boies said the section of the Federal Reserve Act under which AIG received the first $85 billion of what ultimately amounted to more than $180 billion in federal assistance — all of which has been repaid — never in its 75 years has required equity as compensation in return for financial guarantees, except in the case of AIG.

Mr. Boies, who is chairman of law firm Boies, Schiller & Flexner L.L.P. in Armonk, New York, said the government made a “political decision” to single out AIG as a scapegoat in the financial crisis.

The plaintiffs in Starr International Co. v. United States allege that the government’s actions cost them billions of dollars in lost equity and are seeking to be repaid.

The government countered that the plaintiffs suffered no harm. At the time AIG directors agreed to accept the $85 million loan in return for allowing the government to take a 79.9% stake in the company, all involved in the transaction agreed that the loan was preferable to bankruptcy, Justice Department attorney Kenneth Dintzer told Judge Wheeler.

If the Federal Reserve, which approved the loan, “had wanted to harm AIG in some way, all it had to do was nothing,” he said,

Mr. Dintzer said that without the loan, the value of AIG stock was “zero.” He added that “there never was an entitlement to a loan.”

At the conclusion of the closing remarks, Judge Wheeler said “not surprisingly, just about everything in this case is still in dispute” and told the parties that he expected to issue a decision relatively soon.

http://www.businessinsurance.com/article/20150422/NEWS06/150429921