$25 Billion Lawsuit Over AIG Bailout In Damages

25 Billion Lawsuit Over AIG Bailout – A $25 billion lawsuit has been filed against the government in damages over its taxpayer bailout of AIG.

Former AIG CEO Maurice “Hank” Greenberg’s current company — Starr International — filed lawsuits Monday in two federal courts against the Treasury Department and the Federal Reserve Bank of New York. The suits accuse the government of taking valuable assets from AIG’s shareholders without their consent or fair compensation, in exchange for the government’s 80 percent stake in the company. The suit says the government’s actions violate parts of the Fifth Amendment.

Much of the $182 billion in rescue money that AIG got from the government went to pay the New York-based firm’s obligations to big banks.

Starr International was the largest shareholder in AIG. It is suing on behalf of AIG and the AIG shareholders and says the $25 billion or more in damages it wants represents the market value of the 563 million shares the government received, as of last Jan. 14.

“The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency,” Starr International says in the suits. It contends that the government discriminated in its action against AIG, by refusing to provide loans or loan guarantees or access to the Fed’s discount borrowing window as it had to other financial institutions such as Citigroup Inc.

The AIG shareholders didn’t agree “to the proposed taking of their property rights,” the lawsuits say. They were filed against the government in the U.S. Court of Federal Claims in Washington and against the New York Fed in U.S. District Court in Manhattan.

Tim Massad, Treasury’s assistant secretary for financial stability, said “It is important to remember that the government provided assistance to AIG — and stopped it from collapsing — in order to prevent a meltdown of the entire global financial system.

“Our actions were necessary, legal and constitutional,” Massad said in a statement. “We are reviewing the lawsuit and expect to defend our actions vigorously.”