Government Sued Over AIG Takeover

I wondered when this would happen. Remember the insurance giant was not bailed out by the government; it was taken over. Now Star International, a firm now headed by former AIG Chairman Hank Greenberg has filed a $25 billion lawsuit against the US Treasury and the Federal Reserve Bank of New York. By taking over AIG, and here is where stuff will hit the fan, the federal government was able to covertly funnel money to other financial institutions including some foreign banks. Remember the Treasury, not AIG determined, that the New York banks were compensated 100 cents on the dollar for their credit default swaps.

Very simply Star International claims that the shareholders of AIG were deprived of their property without due process. The suit argues that "its problem was not one of solvency but of temporary liquidity," pointing out that its assets "substantially exceeded" its liabilities. It also states "The Government's actions were ostensibly designed to protect the United States economy and rescue the country's financial system," the suit says. "Although this might be a laudable goal, as a matter of basic law, the ends could not and did not justify the unlawful means employed by the Government to achieve that goal."