WASHINGTON — 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.
Judge Thomas C. Wheeler of the United States Court of
Federal Claims sided with Mr. Greenberg, who is still a large A.I.G.
shareholder through his company Starr International. But at the same time, the
judge ruled that Mr. Greenberg could not show that the shareholders were damaged
by the seizure of the equity and therefore awarded no monetary judgment. Mr.
Greenberg had been seeking nearly $40 billion in compensation.
Judge Wheeler wrote that the Fed’s action “constituted
an illegal exaction under the Fifth Amendment.”
“The Board of Governors and the Federal Reserve Banks
possessed the authority in a time of crisis to make emergency loans to
distressed entities such as A.I.G., but they did not have the legal right to
become the owner of A.I.G.,” he wrote in his decision. “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.”
The judge’s ruling also criticized the government for
“unduly harsh treatment” of A.I.G. compared with other financial institutions
that were bailed out during the financial crisis.
However, 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.
The lawsuit went to trial last fall, and the
architects of the bailout like Timothy F. Geithner, Ben Bernanke and Henry M.
Paulson Jr. appeared as witnesses.
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