“The government is on thin ice and they know it,” a lawyer representing the Federal Reserve Bank of New York wrote in a private email on Sept. 17, 2008, as the federal bailout of the American International Group was being negotiated. “But who’s going to challenge them on this ground?”
Well, as it turned out, Maurice R. Greenberg would.
Mr. Greenberg, the former chief executive of A.I.G. — the insurance company whose failure threatened to bring down much of the global financial system with it — is not the most sympathetic figure. But the lawsuit he has brought on behalf of Starr International, a large stockholder in A.I.G., seeking compensation for shareholder losses during those crucial days of the financial crisis, raises troubling issues.
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In a 37-day trial that ended in late November, Starr contended that the government’s actions in the bailout, including its refusal to put some terms of the rescue to a shareholder vote, were an improper taking of private property under the Fifth Amendment. It is seeking at least $25 billion in damages on behalf of A.I.G. shareholders. The judge is expected to rule on the case next year.
Henry M. Paulson Jr., secretary of the Treasury at the time and a former Goldman chief, was instrumental in hiring Mr. Liddy, with help from other current and former Goldman executives. Credit Todd Heisler/The New York Times
The government rejected Starr’s accusations, contending that its rescue of A.I.G. kept the company from disaster and that A.I.G.’s board agreed to the bailout terms.
Those backing the government are indignant over the case. A.I.G. shareholders did well in the bailout and should be grateful for it, they say. And all’s well that ends well, right? A.I.G. repaid its $182 billion rescue loan in 2012; the government generated a profit of $22.7 billion on the deal.