Federal Government Releases Ruling in AIG Bailout
The US Court of Federal Claims recently ruled on behalf of American International Group (AIG) in a case brought by Starr International Co. Inc., formerly one of the largest shareholders of AIG stock. The lawsuit challenged the US government over the 2008 bailout of AIG. In the ruling, Judge Thomas C. Wheeler found that the Federal Reserve overstepped its authority by taking 79.9 percent of AIG’s equity as a condition of the bailout.
Judge Wheeler ruled, “The Government’s unduly harsh treatment of A.I.G. in comparison to other institutions seemingly was misguided and had no legitimate purpose, even considering concerns about ‘moral hazard.’” He also stated, “There is nothing in the Federal Reserve Act or in any other federal statute that would permit a Federal Reserve Bank to take over a private corporation and run its business as if the Government were the owner.”
AIG was represented by the law firms Boies, Schiller & Flexner LLP and Skadden, Arps, Slate, Meagher & Flom LLP. Robert MacLaverty testified on credit default swaps. He and other experts in the case were supported by Elizabeth Kroger Davis.