According to former CEO Maurice “Hank” Greenberg and his complaint, “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency.” Because of the bailout’s “punitive” interest rate, the suit claims the U.S. violated the Fifth Amendment, which protects private property from “public use, without just compensation.”
American International Group Inc,(AIG) the insurer rescued by the U.S. government in 2008 with a bailout that ultimately totaled $182 billion, may now join a lawsuit against the government alleging the terms of the deal were unfair, Reuters reports.
The news prompted a swift reaction from one of AIG’s rescuers, with the Federal Reserve Bank of New York saying the insurer could have just as well chosen bankruptcy four years ago and wiped shareholders out entirely.
The move would be something of a shock development given that AIG just launched a high-profile television ad campaign called “Thank you, America,” in which it offers the public its gratitude for the bailout.
At the same time, Chief Executive Bob Benmosche has complained that the company and its management have not gotten enough credit for avoiding a collapse, turning the business around and returning to profitability.
AIG confirmed on Tuesday that its board would meet Wednesday to discuss joining a lawsuit filed against the government by the insurer’s former chief executive, Maurice “Hank” Greenberg.
Greenberg, whose Starr International owned 12 percent of AIG before its near-collapse, has accused the New York Fed of using the rescue to bail out Wall Street banks at the expense of shareholders, and of being a “loan shark” by charging exorbitant interest on the initial loan.
A federal judge in Manhattan dismissed Greenberg’s suit in November; a separate suit under different legal theories in the U.S. Court of Federal Claims is still pending.