EDITORIAL: AIG ruling just

May 10--One of the poster children for bad behavior leading to the global economic calamity of 2008 was American International Group, the world's largest insurer. It bet heavily on worthless mortgage-based securities and lost.

AIG's case was troublesome because its financial health underlay the financial health of other huge financial institutions. Its collapse might have dragged the economy with it.

To prevent that, the federal government took a 79.9 percent ownership stake in AIG in exchange for an $85 billion bailout loan from the Federal Reserve Bank of New York. That bailout later grew to nearly $185 billion. The size of the bailout and its interest rate, 12 percent, reflected the massive risk inherent in AIG's condition.

AIG since has repaid the loans, at a $23 billion profit to taxpayers, and is profitable.

Incredibly, former AIG CEO Maurice "Hank" Greenburg sued the government through his Starr International Co., which owned 12 percent of AIG. He contended that the government bailout cheated AIG investors and was unconstitutional under the 5th Amendment's prohibition against the government seizing private property without "just compensation."

A judge on the U.S. Court of Federal Claims agreed in principle in 2015 but rejected Greenburg's demand for $40 billion in damages.

Tuesday in Washington, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit reversed that decision. It found that if there were any damages, they were suffered by AIG rather than Starr. AIG did not sue.

Greenburg would have received nothing if taxpayers did not come to his rescue, because AIG clearly would have collapsed. The appellate ruling prevents a grievous insult to those taxpayers and an unjust reward to Greenburg for AIG's dangerous conduct on his watch.

___

(c)2017 The Times-Tribune (Scranton, Pa.)

Visit The Times-Tribune (Scranton, Pa.) at thetimes-tribune.com

Distributed by Tribune Content Agency, LLC.