Maurice "Hank" Greenberg's Starr International Co., AIG's biggest shareholder before the rescue, claims in the lawsuit that the government illegally took equity in the company and that a 14 percent interest rate on the rescue loan was extortionate. Starr is seeking at least $25 billion in damages.
Bernanke, set for his second day of testimony today in the U.S. Court of Federal Claims in Washington, yesterday defended the higher rate, saying the $85 billion loan "was intended to prevent the collapse of a systemic firm" while the interest kept its shareholders from reaping a windfall.
The former Fed chairman, who was preceded on the witness stand this week by for Treasury secretaries Henry 'Hank' Paulson and Timothy Geithner, has so far given terse, even dismissive responses under questioning by David Boies, and calling the lawyer for Starr a highly formal "sir" when answering.
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