Ex-Treasury Secretary Paulson says AIG bailout was punitive
By Aruna Viswanatha
WASHINGTON (Reuters) - Former Treasury Secretary Henry "Hank" Paulson told a packed courtroom on Monday that AIG shareholders were singled out for punishment as part of the U.S. government's attempt to contain the contagion of the 2008 financial crisis.
The testimony from Paulson appeared to bolster some claims contained in a lawsuit brought by former AIG Chief Executive Hank Greenberg, who contends the terms of a government loan to AIG cheated its shareholders.
"AIG, either fairly or unfairly, ... became a symbol for all that is bad on Wall Street," Paulson said as he testified about the U.S. government's bailout of the insurance giant, which began with a $85 billion loan from the New York Federal Reserve in September 2008.
Paulson, who appeared relaxed as he testified in federal court in Washington, said he supported the loan as appropriate for the circumstances, especially because officials needed to send a message that any bailout would come with strings attached.
But he did not shed much light on how the terms of the loan were selected, which is at the heart of the case.
Paulson was one of the chief architects of the U.S. government's response to the unprecedented global credit crisis of 2007-2009, and he has since written a book about the experience. Monday's courtroom setting put Paulson on the hot seat in a way he has not experienced since Congress wrapped up its hearings on the subject years ago.
Legal experts have doubted the strength of the lawsuit, which is seeking as much as $50 billion from the government. The outcome of the lawsuit may affect how much flexibility regulators will have when they respond to future financial crises.