RISK MANAGEMENT April 22, 2015 Government had no right to take 80% in AIG bailout: Greenberg lawyer
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.
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
basic knitting at this point - IMO
if the Judge (who makes the decisions in our system) believes the above - that the ONLY other action possible in this universe with our sun was CH11 then Greenberg is dead
if the Judge is not convinced or ? -- it will get interesting
And I do not know if during the trial there was good information on was it so far gone - where there other offers
but if 30 minutes later a ch11 or a ch7 was next - and it was 99% likely to wipe out all equity
then Starr loses - if that is how the judge views the timing and need for the GOV action
i.e. the GOV action is ONLY reasonable if it is for fact the only offer on the table - a table about to self implode and burn up in one second
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