WASHINGTON (AP) – It could be an awkward reunion.
Three top former government leaders who devised the 2008 financial bailouts – Henry Paulson, Timothy Geithner and Ben Bernanke – are set to testify this week in a lawsuit over the government’s rescue of the insurance giant AIG.
Six years ago, their rescue plan revived AIG, protected its far-flung financial partners and helped save the financial system. Yet AIG’s former CEO, 89-year old Maurice Greenberg, argues that the government’s bailout was illegitimate and is demanding roughly $40 billion in damages for shareholders.
This despite the fact that Greenberg orchestrated a 2010 deal in which he unloaded $278 million in AIG shares that his holding company owned – a windfall that might have been impossible without the government’s intervention.
The lawsuit alleges that the bailout violated the Constitution’s Fifth Amendment by taking control of AIG without “just compensation.” Greenberg objects to the government’s takeover of a company approaching bankruptcy in exchange for what would eventually become $180 billion-plus in taxpayer-backed loans.