U.S bailout of AIG in 2008 was 'punitive,' ex-CEO's lawyer says
By Lindsay Dunsmuir
WASHINGTON (Reuters) - The U.S. government was "punitive" in its bailout of American International Group Inc in 2008, a lawyer for the company's former chief executive argued during closing arguments of a trial that may impact how much flexibility regulators will have when they respond to future financial crises.
Former AIG Chief Executive Maurice "Hank" Greenberg, who was in court on Wednesday for the first time during the trial, is seeking to convince a federal judge that the U.S. government's rescue terms for the New York-based insurance giant to save it from bankruptcy cheated its shareholders.
"They were punitive to AIG because someone had to be a political scapegoat," Greenberg's lawyer, star litigator David Boies, said on Wednesday in his closing arguments, which followed six weeks of testimony last fall.
He said the government had singled out AIG and tried to "demonize" the company.
Greenberg, 89, through his Starr International Co, was AIG's largest shareholder with a 12 percent stake before the bailout in September 2008.
AIG's problems stemmed from insurance it wrote on billions of dollars worth of shoddy mortgage securities.
Greenberg sued the U.S. government in 2011, arguing that the New York Federal Reserve's initial $85 billion loan package, which carried an interest rate of 14 percent and a nearly 80 percent U.S. stake in AIG, was an illegal takeover from shareholders.
Lawyers for the U.S. government countered that the bailout, which ultimately rose to $182.3 billion, raised the value of AIG shares and that policymakers had to consider "moral hazard" concerns when calculating its terms. Continued...