Maurice R. Greenberg, the former chief executive of the American
International Group, prevailed in his lawsuit against the United States
government on Monday, but a federal judge declined to award any damages.
The lawsuit, brought by Mr. Greenberg on behalf of himself and other A.I.G.
shareholders, contended that the Federal Reserve overstepped its bounds when
it bailed out the giant insurer in 2008, taking 79.9 percent of the company'
s equity in the process. They argued that the Fed did not have the legal
right to take the equity and effectively become its majority owner as a
condition for the bailout.
when it came to assessing damages, Judge Wheeler ruled that he "must examine
what would have happened to A.I.G. if the government had not intervened."
"The inescapable conclusion is that A.I.G. would have filed for bankruptcy,"
he wrote. "In that event, the value of the shareholders common stock would
have been zero."
Consequently, even though the government acted illegally, the shareholders,
he wrote, were not entitled to damages.
It was an interesting case because pundits kept writing/saying that the
judge was sympathetic to Greenberg's claims. They obviously didn't forsee
Judge Wheeler would agree with Greenberg in principle (but not in
pocketbook) that the government bailouts were illegal. Greenberg got 0$ in
damages and he's lost millions in legal fees, though, so personally, he's
worse off than before. He did, however, change the legal landscape with the
case he filed in the little known Court of Federal Claims.
More importantly, and one of the reasons the rest of Wall St. was NOT behind
his suit, was that the decision set a precedent that could mean that there
are never any Federal bailouts of the magnitude of AIG ever again. No big
bailouts for Wall St. in the future - if you still believe in stare
decisis - and the Supremes have shown little regard for the concept lately.
At least billions of tax dollars WON'T be going to the man that many believe
caused much of the damage in 2008. The suit was often characterized by
comparing it to a man suing for damages after he was pulled him from a
burning building about to collapse. Not only did his company survive only
because of taxpayer largesse, his lawsuit closed the door behind him for
anyone like him in the future. Wall St.'s loving him right now - NOT!
But in some ways I agree with Greenberg - the government shouldn't pick
winners and losers in these bailout games - in GENERAL. The devil, as
usual, is in the details.
If anyone had a damage claim it was Lehman Brothers, who didn't get a
bailout package and was quickly chopped up into confetti, blowing away in
the wind. Of course, Lehman was a different kettle of fish, but there are
important parallels between the fates of the two companies. What happened
will be debated endlessly in the future because no one can say for sure what
would have happened if AIG failed, too. Would the world economy collapse
like a string of dominoes, as many predicted?
On Tuesday, June 16, 2015 at 8:16:09 AM UTC-4, ItsJoanNotJoann wrote:
Exactly. A point that most that continue to complain about
the bailouts fail to admit. TARP money was repaid with interest,
the govt recovered money from the equity positions that it
took in some of the companies, etc. And even worse, the libs
like to pretend that the deficit for that one year was almost 2X
what it really was, by counting the TARP funds. TARP wasn't
spending, the govt got it back. Yet they falsely like to use
that one exceptional year as the new benchmark against which
to compare today's deficits. If you look at the current
$450bil deficit, it's horrific, yet the Obama worshippers
claim it's a great achievement by falsely comparing it to
that one year deficit that included TARP and was 3X.
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