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Full Version: AIG Lawsuit
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I just found out that the former CEO of AIG, Maurice Greenberg, has filed a class action suit naming the Treasury Dept. and the Federal Reserve as defendants. Apparently this has been ongoing for a few years now so I'm pretty late to the party. I've been reading its complaint but I'm not done with it yet.

Things could get really interesting if Geithner, Paulson, and Bernanke have to testify. The suit alleges that the government's takeover of AIG violated Delaware corporate law, the Federal Reserve Act, and the Fifth Amendment to the Constitution and that it was completely unnecessary. Furthermore it claims that the Treasury and FED colluded to use AIG to funnel bailout money to foreign banks under the radar.

AIG gets a bad rap but as far as I know it wasn't handing out subprime mortgages or fraudulently bundling junk assets and selling them under pumped up ratings. They were simply insuring certain derivatives. When the housing bubble burst they got screwed because they couldn't liquify assets fast enough to pay out insurance claims. They did, however, have enough assets to cover the claims.

Any thoughts on this?
he's suing them because he lost 96% of his investment in AIG.

he's basically accusing the US govt. of crushing their share price by bailing them out.

very strange and absurd lawsuit.

better to have 4% left than nothing.
It's a bit more complex than that. The government bought up one class of stocks but to take control over the company these stocks had to be converted to common stocks. By Delaware law stockholders must vote to do that because it dilutes the shares that they own. The stockholders took a vote and rejected the conversion. The government converted them anyway. Not only did the government violate Delaware law to do this, but it also violates the Takings Clause of the Constitution. If the government seizes property for the public good, as it did in this case, then it is required to compensate the owners at a fair market value. The dilution of shares meant that the property was seized without just compensation. Furthermore assets were sold off at below fair market prices.

No other companies that were bailed out went through this. Instead they got loans at very low interest rates. It looks to me like the government made AIG a scapegoat in order to deflect attention away from the banks, Federal Reserve, rating agencies, and the government itself.
Yes. I am going to look into it. I traded AIG before when it was very volatile.
I've been trying to follow the news on this because Geithner and Bernanke have both given extended testimony. There's been surprisingly little coverage. From what I've been able to glean they haven't been able to give any good reasons for why the takeover was necessary to save the US from a depression. They expressed fear that it would happen, but fear is a terrible basis for economic, legal, and political decisions. I'll probably have to wait for the trial to be over and then get the transcripts.
I actually think the bailouts were necessary to perpetuate the ponzi scheme.
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