Fed Seeks Dismissal of Starr Suit in New York

NU Online News Service, July 9, 11:00 a.m. EDT

The Federal Reserve Board of New York has asked a federal court in Manhattan to dismiss a lawsuit filed by Maurice Greenberg related to how the government provided financial aid to American International Group in 2008.

The suit, filed in the Federal Court for the Southern District, alleges that the federal government “discriminated” against American International Group by taking it over rather than loaning it money when it ran into financial problems in September 2008.

The request, filed on Monday last week, is separate from a ruling also made on Monday, by a judge in the Federal Court of Claims who cleared a suit filed in Washington seeking money from the government on behalf of Starr and shareholders.

In the New York filing, lawyers for the Fed said one of its reasons the suit should be dismissed is that the actions of the federal government, including those of the Federal Reserve Bank of New York, brought the company back from the brink of bankruptcy.

“In September 2012, four years will have elapsed since FRBNY took decisive, affirmative, historic actions to rescue AIG from bankruptcy,” the filing says.

“By now, it is clear that the AIG rescue avoided potentially catastrophic consequences to the national and global economies from AIG's bankruptcy,” the filing continues.

“The bankruptcy of AIG would have inflicted substantial hardship on thousands of Americans, including those who, absent a rescue, would have lost their AIG jobs,” the filing said.

The New York suit, filed in the Federal Court for the Southern District, alleges that the federal government “discriminated” against AIG by taking it over rather than loaning it money when it ran into financial problems in September 2008.