The former chief executive officer (CEO) of American International Group (AIG), Hank Greenberg, has won his fight against the US government.
Despite the finding that the US Federal Reserve had exceeded its authority in AIG’s 2008 bailout, Greenberg was not awarded any damages.
Greenberg’s Starr International Co, one of the largest shareholders of AIG common stock before the takeover, had claimed damages in excess of $40 billion.
Judge Thomas Wheeler of the Federal Court of Claims in Washington explained that the US Federal Reserve’s action of taking 79.9 percent equity ownership and voting control of AIG constituted an illegal exaction under the Fifth Amendment.
“In the Federal Reserve’s history of making hundreds of emergency loans to commercial entities, the loan to AIG represents the only instance in which the Federal Reserve has demanded equity ownership and voting control. There is no law permitting the Federal Reserve to take over a company and run its business in the commercial world as consideration for a loan,” said Wheeler.
However, he added: “The inescapable conclusion is that AIG would have filed for bankruptcy, most likely during the week of September 15-19, 2008. In that event, the value of the shareholders common stock would have been zero.
“By loaning AIG $85 billion under the September 22, 2008 Credit Agreement, the Government significantly enhanced the value of the AIG shareholders’ stock. While the taking of 79.9 percent equity ownership and the running of AIG’s business were not permitted under the Federal Reserve Act, the Government did not cause any economic loss to AIG’s shareholders, because as Mr Studzinski said, “twenty percent of something is better than 100 percent of nothing.”
AIG, American International Group, Hank Greenberg, US Government, North America