The common denominator is Timothy Geithner, former head of the NY Fed when AIG was taken over in 2008 and now of course the US Treasury Sec....
Maurice R. Greenberg, the former chief executive of the American International Group, sued the United States Treasury and the Federal Reserve Bank of New York on Monday, contending that their takeover of the insurer in the fall of 2008 was improper and that the Fed breached its duty to A.I.G. shareholders when it unwound the company’s disastrous bets on mortgage securities.
The two lawsuits were filed on behalf of Starr International, Mr. Greenberg’s company and a large A.I.G. shareholder. The suit against the Treasury was filed in the United States Court of Federal Claims in Washington, while the case against the New York Fed, a private corporation, was brought in Federal District Court for the Southern District of New York.
http://www.nytimes.com/...
The lawyer for Greenberg et. al is none other than high profile litigator David Boies, best known as Al Gore's attorney in Gore v. Bush.
“What these lawsuits say is that in our country, not even the government is above the law,” said David Boies, the lawyer at Boies, Schiller & Flexner, who represents Mr. Greenberg and Starr. “When the government takes action, although it has enormous power, there are legal limits to what they can do. One of those limits is that they cannot take private property even for a good purpose if they do it in violation of legal protection or don’t give just compensation.”
The lawsuit follows last month's GAO report that was highly critical of Geithner's action at the NY Fed:
The report, by the Government Accountability Office, says that New York Fed officials have offered inconsistent explanations for their decision to pay other financial companies the full amounts they were owed by A.I.G., and that some of the explanations were contradicted by other evidence.
The report also asserts that the decision to pay the full amounts, rather than seeking concessions as the government later did in other cases, disregarded the expectations of senior Fed officials in Washington and the expressed willingness of some of the companies to accept smaller payments.
In one case, when a company offered to accept a smaller amount of money, officials at the New York Fed responded that they had decided to pay the full amount of the debt, the report said.
My gut feeling is that the lawsuit will necessarily need to be settled quickly out of court, lest the depositions of Geithner, Paulson and friends and document discovery undertaken.
There's way too much at stake for the ubernauts of the 1% for the unimportant details to get out.
The Federal Reserve Board of Governors voted in September 2008 to let the New York Fed lend up to $85 billion to A.I.G. as part of a deal that placed the company under federal control. The bailout was expanded several times, ultimately expanding to more than $180 billion. And roughly a quarter of that money was used to pay 16 companies that had bought credit-default swaps from A.I.G. — a roll call of the most prominent names on Wall Street, including Deutsche Bank and Goldman Sachs.
In other financial news today, former NJ Governor Jon Corzine's MF Global firm has apparently not lost $600 million dollars as previously reported, but there is now an estimated $1.2 billion unaccounted for. Chump change for sure, but when that kind of money goes missing in New Jersey there's usually a freshly dug spot in the Meadowlands in store.
