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Sandro Rosell
FC Barcelona President
Sunday, September 24, 2017

Former AIG boss recently lost his appeal over AIG bailout 

A federal appeals court rendered a death blow to the case of former AIG CEO Maurice “Hank” Greenberg. A federal appeals Court threw out a ruling that the U.S. government had overstepped its bounds when it bailed out the insurance company as part of a “too big to fail” philosophy during the 2008 financial crises. 

Greenberg referred to the terms of the bailout as “extortionate”. As part of the bail-out package, the government took at controlling stake in AIG in exchange for a loan to offset losses on bad mortgage securities. 

The Court still published a 70-page unanimous ruling by a three-judge panel. The team concluded that Greenberg and his company Starr International, a major AIG shareholder, “lack standing” to bring a lawsuit against the government. 

As part of the ruling, the court of appeals said that AIG itself, and not a shareholder of the principal entity would have had legal standing in this case. 

In 2015, a lower federal court ruled that the Federal Reserve’s demands in exchange for a bailout were far too exorbitant. The Federal Reserve demanded an 80-percent stake in the company in exchange for an $85 billion loan from taxpayers. This loan was the largest ever recorded and was responsible for keeping the company salient during the crises. 

Greenberg sought $40 billion in damages as a result of the losses incurred in 2008. Greenberg himself is worth an estimated $3.2 billion. 

The appeals court also ruled that the appeals Court was correct in denying Greenberg any damages. 

The Trial lasted for many weeks and began in late 2014 and included VIP witnesses such as former Treasury Secretaries Henry Paulson and Timothy Geithner and former Federal Reserve chairman Ben Bernanke. 

The Plaintiffs argued that the government had treated AIG unfairly because unlike other companies, AIG needed to provide an equity stake as collateral in order to be properly bailed out. 

The government argued in its defense that the demand of the equity stake was necessary; otherwise, AIG would have gone under. 

Kenneth Dintzer, a lawyer for the government said during the initial Trial that “The goal was not to save AIG…the goal was to save the world from AIG.” 

David Boies, the lawyer for Greenberg said that he will likely appeal the Court’s decision. 

In a statement regarding the decision, Boies said “The Trial court found that the Government had improperly and unconstitutionally confiscated 80% of the AIG shareholder equity during the 2008 financial crises. The Court of appeals, without disagreeing with that finding, holds that the shareholders have no remedy and that the Government is entitled to retain more than $18 billion in ill-gotten gains. We respectfully disagree and will ask the Supreme Court for review.” 

By: Svetlana Rusikaya