NU Online News Service, Nov. 22, 12:45 p.m. EST
Responding to a lawsuit filed by a company run by former American International Group Chief Executive Maurice “Hank” Greenberg, The Treasury Department says its actions during the bailout of AIG were “necessary, legal, and constitutional.”
Greenberg's Starr International Co. filed a lawsuit against the United States, saying the government violated the Fifth Amendment of the Constitution when it took majority ownership of AIG without compensating the company's shareholders. The suit was filed Nov. 21 in the U.S. Court of Federal Claims, and seeks $25 billion for Starr and a class of AIG shareholders, an amount based on the value of the government's stake in AIG as of Jan. 14. Jan. 14 is when AIG finalized a recapitalization plan with the federal government. The government now holds a 77 percent stake in AIG.
In response, Tim Massad, assistant secretary for Financial Stability at the U.S. Department of the Treasury, says in a statement, “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.”
Massad adds, “We are reviewing the lawsuit and expect to defend our actions vigorously.”
In its lawsuit, Starr says the federal government cannot deprive any person of property without due process of law, and cannot appropriate private property for public use without compensation—which Starr alleges happened when the government funneled billions of dollars to foreign entities, using AIG as a vehicle.
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