Andrew Ross Sorkin is just an apologist for Henry Paulson and gang. The judge seemed to agree that bailouts were selective. The only reason AIG was bailed out was the catastrophe of not bailing out Lehman. Why wasn't Lehman bailed out? The reason was that Paulson, a Goldman Sachs trader, disliked Lehman's president Fuld. The problem is that Henry Paulson not being an academic but a trader at Goldman never foresaw the consequences of his extremely mistaken decision. He almost brought the country to it's greatest economic crisis. This is what you get if you make traders your Treasury Secretaries instead of academics. The judge saw the inconsistencies and arbitrariness of the government's actions and said you have to be fair and have one set of rules.
1
Shocking that a Bush judge would show sympathy for the vampires and lambaste the people for making a tough (not tough enough IMO) deal.
1
The government should have just let the company fail...
1
This article was more confusing than the ruling and reads more like an editorial than an description of the news.
The ruling didn't decide in favor of AIG because the terms of the bailout were too harsh or were unfair compared to the treatment of other banks. The court's logic was basically that the Fed had no legal authority to take equity and control the management of a Company as consideration for making loans (i.e., taking equity as consideration and running companies is not one of the Fed's incidental powers).
The opinion goes into an analysis of why the appropriation was an "illegal exaction" and not a Fifth Amendment taking and whether AIG's acceptance of the terms of the deal is a defense against an illegal exaction claim, but the basic takeaway for me is an affirmation of the rule of law--the government can't just take your property without some kind of legal authority.
The ruling didn't decide in favor of AIG because the terms of the bailout were too harsh or were unfair compared to the treatment of other banks. The court's logic was basically that the Fed had no legal authority to take equity and control the management of a Company as consideration for making loans (i.e., taking equity as consideration and running companies is not one of the Fed's incidental powers).
The opinion goes into an analysis of why the appropriation was an "illegal exaction" and not a Fifth Amendment taking and whether AIG's acceptance of the terms of the deal is a defense against an illegal exaction claim, but the basic takeaway for me is an affirmation of the rule of law--the government can't just take your property without some kind of legal authority.
1
It's hard to ignore the chutzpah here: AIG sues the government for saving it, claiming the terms were overly harsh.
Would AIG have preferred to go the way of Lehman Brothers?
Would AIG have preferred to go the way of Lehman Brothers?
2
"While the ruling is likely to be appealed, possibly all the way to the Supreme Court, the head-scratching decision will undoubtedly have an effect on future bailouts..."
But if the ruling is successfully appealed, it would be thrown out and have no effect on future bailouts or anything else. It'll be in the trash can.
Joseph in Missoula
But if the ruling is successfully appealed, it would be thrown out and have no effect on future bailouts or anything else. It'll be in the trash can.
Joseph in Missoula
If this Decision holds up as a precedent that outlaws any future bailouts of Banks, as always, the Government will simply disregard that precedent and claim "National Security" to avoid public chaos. The old "National Security" line works every time. Did anyone ever challenge it?
The trouble is, those who make the laws are above the laws. That's not just cynicism, just fact.
The trouble is, those who make the laws are above the laws. That's not just cynicism, just fact.
2
It looks like the AIG market cap today is nearly $90 Billion. Since the Fed (i.e. the public) made only $20 Billion on the transaction it seems hard to accept the judge's logic that the Fed drove too hard a bargain. For saving the company from being worthless, the public reaped less than 20% of the rewards in the market.
1
Biggest winner in the end was Goldman Sachs, who were fully paid by AIG, courtesy of the American public. Now we can look forward to Goldman loaning that money back to us with interest as they move into consumer loans. Their chutzpah makes Greenberg's look pretty puny, and that's not an easy task.
6
The judge really had no reason to include his own personal opinion as to wether or not AIG got a fair deal. That's neither here nor there nor relevant to the ruling. We can understand that as an insurance company the federal reserve had no legal authority to step in, we can also come to conclusion that has a result of the bailout AIG suffered no damages because the other alternative was bankruptcy. It's very unsettling that the Judge seems to think that because the banks got a sweetheart deal that AIG deserved one also. By that logic the Fed should have been legally responsible to bailout Lehman Brothers as well. I do agree though the banks also should have gotten pennies on the dollar.
This decision, like the decision overruling Obama's immigration regulation and the lower court decision regarding the pending case concerning the Affordable Care Act were all identified by this newspaper as "confounding many legal experts". All these "stunning rulings" were made by Republican judges and all the wrong predictions were made by Democratic experts. It's time to acknowledge that Republican judges often rule on cases in a manner that Democrats consider to be inappropriate and unexpected. The continued reliance on experts who get things wrong is unjustifiable. Readers should not be led to believe that Republican judges consistently decide cases contrary to law. Rather, the fundamental disagreement between judges of the two parties should be acknowledged allowing readers to anticipate that such disagreements occur repeatedly, are eminently predictable, and are anything but "stunning."
This ruling, depending on the outcome of any appeals, should and likely will mean that there will be no future bailouts.
1
This article does not do a very good job explaining the ruling or its consequences. It seems that the judge ruled that the NY FRB did not have the legal right to negotiate those concessions from AIG that it did and run AIG, but in the end AIG investors were better off than if the NY FRB had not negotiated those concessions and run AIG.
What is troubling about the judge is the words he chose to describe his ruling: "inequitable," "unfair," ... He is basically saying because investors in other institutions were rescued by the government, everyone should have been rescued. That is like a criminal judge ruling, everyone should go free because some criminals get away with their crimes.
What is troubling about the judge is the words he chose to describe his ruling: "inequitable," "unfair," ... He is basically saying because investors in other institutions were rescued by the government, everyone should have been rescued. That is like a criminal judge ruling, everyone should go free because some criminals get away with their crimes.
8
In a twisted way, what I loved (OK, appreciated) about the debate at the time the "Bail Outs" were being proposed, folks wanting the Government to do Nothing?
I kinda wanted them to do, just so the global market would've collapsed just to hear them Itch for the Rest of Lives Lambasting the Govt for NOT doing anything to stop it (collapse):):):)
Those faulty "Defaults" were so entrenched (in the markets) globally, no one knew where they began or ended, OK maybe Goldman and AIG knew,...but no one else did:).
"Let them drown, if they take the rest of us with them, so be it!!!":):)
I kinda wanted them to do, just so the global market would've collapsed just to hear them Itch for the Rest of Lives Lambasting the Govt for NOT doing anything to stop it (collapse):):):)
Those faulty "Defaults" were so entrenched (in the markets) globally, no one knew where they began or ended, OK maybe Goldman and AIG knew,...but no one else did:).
"Let them drown, if they take the rest of us with them, so be it!!!":):)
I agree with the Judge and Greenberg that the law was broken. So who will prosecute the players in criminal court? ha ha.
The law is the law (if constitutional and in line with "common law"), whether people think it is optimal or not, or like it or not. When the Federal Reserve or the Federal Government break the law, their leaders and all involved should be sanctioned. Don't like the law...then change it legally. Selective prosecution of some people and not others draws disrespect for the law in general, as we see in the regular people on main street, who see the elites get away with "murder".
Bail-outs simply strengthen the "bad or incompetent" actors that created the problem. Our system requires the liquidation of bad debt which did not happen and the problem only grows with the bad actors getting stronger. Dodd-Frank makes thing much worse because now we the tax payers will have to bail out all the banks to an unlimited extent. The solution is to let the banks fail, and be taken over by wiser owners. Will it hurt people on main street, maybe but not as much as the current corrupt system, because the current system can only lead to more endless malaise and an eventual collapse.
We are descending further into a law-less state, where judges, prosecutors, lawmakers, and journalists make up the law (or expect the law) to suit their tastes, or motives, or what they think is fair (even if it breaks the law).
The law is the law (if constitutional and in line with "common law"), whether people think it is optimal or not, or like it or not. When the Federal Reserve or the Federal Government break the law, their leaders and all involved should be sanctioned. Don't like the law...then change it legally. Selective prosecution of some people and not others draws disrespect for the law in general, as we see in the regular people on main street, who see the elites get away with "murder".
Bail-outs simply strengthen the "bad or incompetent" actors that created the problem. Our system requires the liquidation of bad debt which did not happen and the problem only grows with the bad actors getting stronger. Dodd-Frank makes thing much worse because now we the tax payers will have to bail out all the banks to an unlimited extent. The solution is to let the banks fail, and be taken over by wiser owners. Will it hurt people on main street, maybe but not as much as the current corrupt system, because the current system can only lead to more endless malaise and an eventual collapse.
We are descending further into a law-less state, where judges, prosecutors, lawmakers, and journalists make up the law (or expect the law) to suit their tastes, or motives, or what they think is fair (even if it breaks the law).
5
Seems like a lot of writers think Mr. Greenberg was running AIG when everything blew up. He left AIG in 2005, after which AIG started to insure the CDOs and other debt instruments that would be its undoing. He reportedly was furious that the new managers, through this new financial engineering, unwound in only 3 years the company he spent decades building.
He was still a major shareholder at the time of the bailout, and it is as a shareholder he was suing for damages.
He was still a major shareholder at the time of the bailout, and it is as a shareholder he was suing for damages.
5
I teach accounting, and this is a perfect example of the govt transferring Liabilities into the Treasury where no compensating Assets were transferred. This was a stupid, BAD deal of friends bailing out friends. Shame!
5
Judge Wheeler could have dismissed this action in the beginning without reaching the merit on on case. One of the requirements for bring an action for money damages in court is that a plaintiff must suffer some monetary damages. Greenberg's house of cards was near collapsed before the Fed took any action. If the Fed did not take any action, it would end up either in bankruptcy or receivership anyway. And I really doubt that Greenberg and other AIG shareholders would get anything in that type of proceedings.
Greenberg, like so many others on Wall Street who were playing this no-money-down game for so long and making so such money in the process, should have gone to jail. It is always amazing how these fat cats who almost bring down our entire financial system end up suing the government while some poor black kids get incarcerated for 5 years for a small possession of illegal substance.
Shame on you, Greenberg.
Greenberg, like so many others on Wall Street who were playing this no-money-down game for so long and making so such money in the process, should have gone to jail. It is always amazing how these fat cats who almost bring down our entire financial system end up suing the government while some poor black kids get incarcerated for 5 years for a small possession of illegal substance.
Shame on you, Greenberg.
8
Well, part of the reason for the bailout of AIG was also its local insurance subsidiaries. Read Matt Taibi for just how that went down - if AIG had not received government funds, it would have gone after its security holdings in its insurance subs - meaning your life insurance policy would be wiped out to pay off the bad bets made by Goldman and AIG for insuring them in the first place. So while not bailing them out next time might be a good thing, it also may have horrible consequences for the ordinary American - not only was Main street decimated the first time, but don't give them bailout money and Main street gets it again - it won't be the banks that implode.
4
A clear signal that we have lost our country and democracy to the corporations and wealthy. It seemed like it was happening but this tells us that it's become a fact and that we, as 'voters', are just a footnote.
Please tell us a bit more about Judge Wheeler, his resume, his wealth and who appointed him...I suspect (but do not know) it will be enlightening.
Please tell us a bit more about Judge Wheeler, his resume, his wealth and who appointed him...I suspect (but do not know) it will be enlightening.
4
It’s no wonder the corporate sympathizer presiding over this case is a Bush appointee. After all, Bush appointees on the US Supreme Court made up sixty percent of the majority that ruled unlimited amounts of anonymous corporate money infesting the American elective process is "free speech” that will have no corrupting influence in governmental affairs.
We’ve all seen how that turned out...
Is it any wonder this "free speech" money is now flowing into the campaign coffers of Bush III?
We’ve all seen how that turned out...
Is it any wonder this "free speech" money is now flowing into the campaign coffers of Bush III?
5
It is not exactly accurate to refer to "Judge Thomas C. Wheeler." Technically, he is not a Federal judge. Specifically, he is not an Article 3 judge with lifetime tenure. He can be removed by the U.S. Court of Appeals for the Federal Circuit for "incompetency, misconduct, neglect of duty, engaging in the practice of law, or physical or mental disability." In this ruling he has exhibited several of those causes for removal. He told to find employment where his competencies are more suited. I am sure he will find plenty of interest on Wall Street.
1
Just plain wrong. Article I judges are "judges," and have been so since 1855.
1
The answer here seems easy to me.
The Judge indicated that AIG was treated unfairly because they were treated differently than the Big Banks. To me this suggests not that we shouldn't have put AIG over the barrel, but that we should have put all of those Banks over the barrel as well.
Am I missing something?
The Judge indicated that AIG was treated unfairly because they were treated differently than the Big Banks. To me this suggests not that we shouldn't have put AIG over the barrel, but that we should have put all of those Banks over the barrel as well.
Am I missing something?
10
The headline of this article, "In A.I.G. Case, Surprise Ruling That Could End All Bailouts" seems a bit overstated. This is one ruling by a single judge in the US Court of Federal Claims. One judge (with the possible exception of members of SCOTUS) should not be able to set major US policy.
A question for any lawyer who's followed this case:
Since the government did in fact bail out AIG (even though it could have just let AIG go bankrupt) and the judge ruled that the government had no right to take 79.9% of AIG equity (or any equity) in return, doesn't that mean that the 20% ownership left to the pre-bailout AIG shareholders was really 100% of the AIG equity? That conclusion seems hard, if not impossible, to avoid. If the government's 79.9% stake later yielded a $20 billion profit, shouldn't that profit belong to the pre-bailout AIG shareholders? Again, that conclusion seems inevitable. Not "damages," to be sure, and not the $40 billion Greenberg sought, but nevertheless $20 billion that should have gone to the pre-bailout AIG shareholders.
Going forward, of course, the government in such situations probably will say to the next AIG: "Sorry, no can do. The law doesn't allow us to impose terms sufficiently harsh for us to justify taking this risk with taxpayer money. You'll just have to go bankrupt." But that's next time. This time, the bailout occurred.
Since the government did in fact bail out AIG (even though it could have just let AIG go bankrupt) and the judge ruled that the government had no right to take 79.9% of AIG equity (or any equity) in return, doesn't that mean that the 20% ownership left to the pre-bailout AIG shareholders was really 100% of the AIG equity? That conclusion seems hard, if not impossible, to avoid. If the government's 79.9% stake later yielded a $20 billion profit, shouldn't that profit belong to the pre-bailout AIG shareholders? Again, that conclusion seems inevitable. Not "damages," to be sure, and not the $40 billion Greenberg sought, but nevertheless $20 billion that should have gone to the pre-bailout AIG shareholders.
Going forward, of course, the government in such situations probably will say to the next AIG: "Sorry, no can do. The law doesn't allow us to impose terms sufficiently harsh for us to justify taking this risk with taxpayer money. You'll just have to go bankrupt." But that's next time. This time, the bailout occurred.
1
The gov't could have decided that rescuing AIG was too risky. But it didn't, and it wasn't. The greater risk would have been to let it collapse, causing its counter-parties to collapse, and so on down the daisy chain.
The law allows the Fed to offer a loan at any interest rate it wants. 1%, 5%, 10%, 20%. In this case, it wanted low interest and an equity stake. But it's not allowed an equity stake. So next time it will just want higher interest.
But if next time a TBTF firm needs rescuing to save the global economy from collapse, and the gov't decides that the unavailability of equity means that we're all better off living the life of Mad Max, then that gov't is pretty incompetent.
If you don't like TBTF, your focus should be on preventing companies from being TBTF. Your focus shouldn't be on preventing gov't from forestalling global socio-economic collapse.
The law allows the Fed to offer a loan at any interest rate it wants. 1%, 5%, 10%, 20%. In this case, it wanted low interest and an equity stake. But it's not allowed an equity stake. So next time it will just want higher interest.
But if next time a TBTF firm needs rescuing to save the global economy from collapse, and the gov't decides that the unavailability of equity means that we're all better off living the life of Mad Max, then that gov't is pretty incompetent.
If you don't like TBTF, your focus should be on preventing companies from being TBTF. Your focus shouldn't be on preventing gov't from forestalling global socio-economic collapse.
Great question. This was an unlawful exaction case under the Due Process Clause of the Fifth Amendment, not an unjust enrichment case. In the former, the measure of damages is what was lost by the plaintiff who suffered the unlawful exaction. In the latter the damages are what profit was unjustly earned by the defendant. So the $20 billion profit reaped by the government is not germane. Instead, the judge analyzed what the AIG shareholders lost by the exaction. And he concluded they lost nothing, because had the government done nothing rather than take the equity stake undoubtedly AIG would have gone bankrupt and the equity would have been wiped out. As one witness said, if the government really wanted to punish AIG and its shareholders the government should have done nothing, and not made the loan in the first place. I would argue the government should have taken a pledge of stock as collateral, not an equity kicker. Then if AIG defaulted on the loan the government could have realized on the pledge and taken ownership of the stock as any secured creditor would. But to take an outsized equity kicker without paying a strike price was an excessive exaction, and contrary to any statutory authority allowing the government to do so outside of a bankruptcy reorganization. Had there been a pledge the equity would have been undisturbed, as AIG eventually repaid this loan without any default.
Wealth is created by the journeyman, the artist, the factory worker, the engineers and construction crews. The financial services industry creates nothing. They are the ultimate "takers", fiddling with the wealth created by others until it all sticks to their fingers.
But now, they own us. How did that happen?
But now, they own us. How did that happen?
5
And just how do the factory workers get a factory to work in? The construction crew get materials to build with or a sit on which to work? The engineer a project or work on?
The financial industry is the common ground upon which all of these build. I agree that they may not create any material goods themselves, but how much could these creators create working only from their own resources?
And do they not deserve some compensation for the risks they take with their resources?
As to their owning us, they only own as much of us as we have been willing to sell them.
The financial industry is the common ground upon which all of these build. I agree that they may not create any material goods themselves, but how much could these creators create working only from their own resources?
And do they not deserve some compensation for the risks they take with their resources?
As to their owning us, they only own as much of us as we have been willing to sell them.
That so many commenters are perseverating on the issues of interest rates and fairness indicates a lack of understanding of this decision not unlike so many other issues involving the financial crisis. The court states the issues of the case quite clearly:
"The main issues in the case are: (1) whether the Federal Reserve Bank of New York possessed the legal authority to acquire a borrower’s equity when making a loan ...; and (2) whether there could legally be a taking without just compensation of AIG’s equity under the Fifth Amendment..."
This case does not turn on finding excessive or 'usurious' interest rates.
For all the griping about the court's sympathy for 'unduly harsh treatment' of greedy parties who seemingly caused the crisis, Mr. Sorkin and commenters ignore the very next sentence, "The question is not whether this treatment was inequitable or unfair, but whether the Government’s actions created a legal right of recovery for AIG’s shareholders."
The court continues, "It is one thing for FRBNY to have made an $85 billion loan to AIG at exorbitant interest rates ..., but it is quite another to direct the replacement of AIG’s Chief Executive Officer, and to take control of AIG’s business operations. A Federal Reserve Bank has no right to control and run a company to whom it has made a sizable loan."
So go ahead and criticize Mr. Greenberg and AIG, but this ruling is not a victory for them. The court was fair to award no damages despite finding wrongful conduct.
"The main issues in the case are: (1) whether the Federal Reserve Bank of New York possessed the legal authority to acquire a borrower’s equity when making a loan ...; and (2) whether there could legally be a taking without just compensation of AIG’s equity under the Fifth Amendment..."
This case does not turn on finding excessive or 'usurious' interest rates.
For all the griping about the court's sympathy for 'unduly harsh treatment' of greedy parties who seemingly caused the crisis, Mr. Sorkin and commenters ignore the very next sentence, "The question is not whether this treatment was inequitable or unfair, but whether the Government’s actions created a legal right of recovery for AIG’s shareholders."
The court continues, "It is one thing for FRBNY to have made an $85 billion loan to AIG at exorbitant interest rates ..., but it is quite another to direct the replacement of AIG’s Chief Executive Officer, and to take control of AIG’s business operations. A Federal Reserve Bank has no right to control and run a company to whom it has made a sizable loan."
So go ahead and criticize Mr. Greenberg and AIG, but this ruling is not a victory for them. The court was fair to award no damages despite finding wrongful conduct.
4
What people don't seem to understand - and what the article does not cover - is that the AIG bailout was really a method of bailing out Goldman Sachs without ever disclosing Goldman's problems. Then-Treasury Secretary Paulsen was the former CEO of Goldman and Goldman got more than $2 billion from the AIG bailout. The alleged reasons for the bailout were completely overblown - by Goldman. The Feds say they had to do what they did because they had no regulatory oversight of AIG, but that makes no sense. How could they do what they did if they had no oversight? And just to clarify - Greenberg is not AIG - Greenberg was one of the shareholders who got run over the coals by Goldman and the Treasury, which really became one entity under Paulsen.
10
Banksters like Mr Greenberg should be incarcerated rather than being allowed to rip off taxpayers repeatedly.
But that won't happen because the moneyed elite make the rules and twist their interpretations so that others pay for the crimes they repeatedly commit with impunity and arrogance.
A nation of laws, my behind. Oligarchs rule.
But that won't happen because the moneyed elite make the rules and twist their interpretations so that others pay for the crimes they repeatedly commit with impunity and arrogance.
A nation of laws, my behind. Oligarchs rule.
10
It simple re-write the laws
Good then next time let them all fail, even if it takes the rest of the world down too. Maybe then finally our morally corrupt govt will finally put rules into place to stop these bailouts
How big do these companies? How much is enough?
Good then next time let them all fail, even if it takes the rest of the world down too. Maybe then finally our morally corrupt govt will finally put rules into place to stop these bailouts
How big do these companies? How much is enough?
2
The new laws prohibiting "too big to fail" should be relatively simple to compose by simply invoking the principle that "the nations's economic survival must NEVER BE HELD HOSTAGE to the investment success or prosperity of individual private enterprises engaged or involved directly or indirectly (as in backing CDOs or the like) in speculative investments.
Any corporate structure or even size would be illegal if that corporation's failure would endanger the overall economic system, and government reserved the right to monitor corporations as to there size and structure in this regard, and accordingly break up any enterprise afoul of this principle.
Simple as that.
Any corporate structure or even size would be illegal if that corporation's failure would endanger the overall economic system, and government reserved the right to monitor corporations as to there size and structure in this regard, and accordingly break up any enterprise afoul of this principle.
Simple as that.
As summer comes, some of the dramas end with unexpected stories. The 'AIG Saga' sponsored by Maurice Greenberg and his Wall Street friends ended this season with dry humor of Shakespeare. He won the game but he didn't receive a penny. Well, Maurice Greenberg has enjoyed the colorful fall of Eliot Spitzer, his most annoying former attorney general and governor of New York. However, as I said earlier, this drama may continue with new producer called Supreme Court.
3
Elliot Spitzer now ensconced in his family's lucrative real estate empire (talk about soft landings -arguably a particular specialty for this particular justice official - for the ethically fallen rich) aptly demonstrating the increasingly obvious and ubiquitous tradeoff between wealth and justice.
Did anyone left in America actually believe that Wall Street doesn't get "special treatment" by the Justice System? Just look at the paltry results of the very few lawsuits brought after the financial collapse. I'm personally just thankful this judge didn't also give Greenberg the keys to Fort Knox.
7
So the Board of AIG made a "bad" deal, according to Greenberg, an uber-arrogant 1%er. So I still don't understand why the US government is even a party to this lawsuit. Greenberg should have sued the Board and AIG.
This trial is a farce with potentially bad consequences. But not for Greenberg and his fellow arrogant 1%ers.
This trial is a farce with potentially bad consequences. But not for Greenberg and his fellow arrogant 1%ers.
7
Was it usery? Perhaps but they were the lender of last resort and the "market" sure wasn't going to come to the rescue. As for Hank Greenburg not getting a penny - fantastic. He blew up the company, was saved from bankruptcy and then acts like an man who murdered his parents and then has the gall to throw himself on the mercy of the court because he's an orphan.
3
Nothing will stop the abuse by financial institutions until some senior executives go to prison.
6
If the Fed had the power but not the obligation to bail out AIG it could condition its offer to do so on any terms that it wanted. AIG, finding them to be unconscionable, could have walked. The imbalance of bargaining power cited by Judge Wheeler as the reason AIG did not walk was caused by AIG itself--the company had all but legally bankrupted itself--and therefore no grounds for relief from the bargain.
The gall and greed that enables someone to say "thanks for rescuing me but you didn't rescue me quite the way I would have liked, now pay me a fortune" is astounding. And, sadly, typical.
The gall and greed that enables someone to say "thanks for rescuing me but you didn't rescue me quite the way I would have liked, now pay me a fortune" is astounding. And, sadly, typical.
7
I had a client bail out of an approved AIG life insurance policy around the time of their troubles and demanded to be place with another carrier. I am sure there were other such incidents. While the company has made a remarkable comeback, without the bailout, the shareholder value would probably matched the Judge's award. How were the shareholders treated unfairly? I don't believe that a judgment that could have been written by Lewis Carroll is ever going be the precedent that Mr. Sorkin imagines.
1
As a conservative, I think that what the government did was legal and the terms that the government offered to AIG was similar to what any business would offer to a bankrupt company. I thought at the time the government was actually being smart offering pennies on the dollar. The alternative was to find another for-profit business and see what deal they could make, or going out of business.
The courts, I worry, sometimes makes flawed rulings which are hard to overcome.
The courts, I worry, sometimes makes flawed rulings which are hard to overcome.
4
And still little mention of all those, myself included, who lost vast portions of their retirement accounts in the "dark days". Not only money lost; jobs gone or pay diminished, houses lost, dreams gone.
Like AIG and the Big Banks, most of us recovered as best as we could. Our golden parachutes did not open fully so we took quite a few bumps upon landing.
We still are at the mercy of these sharks, just look at the rise of payday loans. Jobs have come back you could say, albeit with less security and stagnant wages. Fifteen dollars an hour being talked about as the new norm in a few years, maybe.
Then you get court cases like this. Don't you think the shoe should be on the other foot and the bankers should be having to answer for their crimes?
Like AIG and the Big Banks, most of us recovered as best as we could. Our golden parachutes did not open fully so we took quite a few bumps upon landing.
We still are at the mercy of these sharks, just look at the rise of payday loans. Jobs have come back you could say, albeit with less security and stagnant wages. Fifteen dollars an hour being talked about as the new norm in a few years, maybe.
Then you get court cases like this. Don't you think the shoe should be on the other foot and the bankers should be having to answer for their crimes?
6
Mr Sorkin, and most others seem to forget that the risk posed by insolvency of the subsidary insurance companies was indeed catastrophic. Nobody knows to this day whether the remaining assets before the bailout were used multiple times by various subsidiaries to support the entire teetering company. States regulate insurers ability to pay claims- regulators depend on each subsidiary of company to present an accurate assets that are not also pledged elsewhere. There was no time and possibly no way to segregate these assets or even to assert that they existed at all.
That's why AIG was rescued - to halt the collapse that would result in a default of life insurance policy claims to people that had been paying premiums for most of their lives. If allowed to occur, that would no doubt be the biggest scandal of all time.
That's why AIG was rescued - to halt the collapse that would result in a default of life insurance policy claims to people that had been paying premiums for most of their lives. If allowed to occur, that would no doubt be the biggest scandal of all time.
2
I doubt that this absurd decision will survive an appeal. Its logic is that the government has no duty to step in and rescue a failing financial firm; that if the govt. doesn't step in, the firm will surely fail; but if it does, it must pay more for the firm's "assets" and give the shareholders good terms, although if the govt. doesn't, they suffer no compensable harm. Bizarre. This is where rank ideology rather than law, on the part of a business lawyer appointed to the Court of Claims by Bush II, leads us -- into a morass of irrational, irresponsible thinking.
5
Judge Wheeler does not understand the nature of financial risk as the following comment from his ruling makes clear. "The notorious credit default
swap transactions were very low risk in a thriving housing market, but they quickly became very high risk when the bottom fell out of this market." The risk in AIG's credit default swaps never changed from the day they were written to the day they expired. The risk only became more apparent in a collapsing market than it had been in a thriving market. Wheeler fails to make his argument that AIG's risk management was no more flawed than that of the investment banks.
swap transactions were very low risk in a thriving housing market, but they quickly became very high risk when the bottom fell out of this market." The risk in AIG's credit default swaps never changed from the day they were written to the day they expired. The risk only became more apparent in a collapsing market than it had been in a thriving market. Wheeler fails to make his argument that AIG's risk management was no more flawed than that of the investment banks.
3
Let's be clear: the financial crisis was not the fault of AIG or other reinsurers. It was the fault of those who knowingly falsified documents to either obtain a mortgage or to con people who did not yet qualify for a mortgage (and who subsequently were harmed when they lost their homes and suffered damaged credit). A recent NYT article cited a study concluding this, as an examination of mortgage applications revealed that borrowers in some areas had, on average, claimed income of roughly twice what had been reported to the IRS. Whether they or unscrupulous loan officers were responsible for this is unclear, however.
Somewhere along the way, someone at the banks lending the money for these mortgages knew or should have known what was happening, but they packaged and sold these mortgages to investors as higher-grade debt anyway.
I worked for one of the duped companies that received a bailout. Had the government not stepped in, the company's shareholders would have been harmed even more than they were when the stock price dropped by 50%, but its mostly working-class customers would also have been hurt had the company had to file for bankruptcy. In addition, many qualified homebuyers lost money due to pricing inflation directly linked to the so-called liar loans.
The government should not be in the business of guaranteeing mortgage debt except as a means of countering ethnic or racial discrimination or enabling renewal of distressed areas.
Somewhere along the way, someone at the banks lending the money for these mortgages knew or should have known what was happening, but they packaged and sold these mortgages to investors as higher-grade debt anyway.
I worked for one of the duped companies that received a bailout. Had the government not stepped in, the company's shareholders would have been harmed even more than they were when the stock price dropped by 50%, but its mostly working-class customers would also have been hurt had the company had to file for bankruptcy. In addition, many qualified homebuyers lost money due to pricing inflation directly linked to the so-called liar loans.
The government should not be in the business of guaranteeing mortgage debt except as a means of countering ethnic or racial discrimination or enabling renewal of distressed areas.
1
Of all the things that blacks and Mexicans get blamed for, this has to be the most hilarious. Spare us.
The kicker: "somewhere along the way, someone at the banks . . . should have known what was happening." Like, I don't know . . . from the start maybe? (They may be greedy, but they sure aren't dumb.)
The kicker: "somewhere along the way, someone at the banks . . . should have known what was happening." Like, I don't know . . . from the start maybe? (They may be greedy, but they sure aren't dumb.)
2
One of my neighbors is in prison for stealing $196,000. He has to pay restitution. My first reaction was that he only stole $196,000. If he'd stolen $196,000,000, he would be free.
15
You forgot, he'd also be revered.
1
Maurice Greenberg reminds me of the definition of chutzpah--someone who has killed both his parents, then throws himself at the mercy of the court because he is an orphan. The fact that he could still afford to bring the case to suit indicates to me that he wasn't too terribly damaged.
1
Only time will tell whether the federal government, and in particular, the Federal Reserve Banks, will cease and desist from rescue-related activities, notwithstanding that being "lender of last resort" would imply that this is precisely what the bank ought, in proper circumstances, to be doing.
Imagine if the federal government had extended an $85 billion unsecured loan to A.I.G. and A.I.G. nonetheless failed. Big ouch. Very big.
Not sure how much Dodd-Frank impedes the rescue apparatus, but I am no expert on Dodd-Frank or its potential for efficacy. The impression I had was that Dodd-Frank was intended at least in part to provide structural and regulatory requirements that would create some insulation from catastrophic failure.
Imagine if the federal government had extended an $85 billion unsecured loan to A.I.G. and A.I.G. nonetheless failed. Big ouch. Very big.
Not sure how much Dodd-Frank impedes the rescue apparatus, but I am no expert on Dodd-Frank or its potential for efficacy. The impression I had was that Dodd-Frank was intended at least in part to provide structural and regulatory requirements that would create some insulation from catastrophic failure.
"Judge Thomas C. Wheeler ... suggested taxpayers should have offered A.I.G. a more generous deal."
But as you yourself say, he said that in the absence of government intervention, AIG would have gone belly up and the stockholders would have been left with nothing, which is why he granted no payment. Still, it is a strange reading of the cse. I suspect, though, that the laws regarding either what the FED or other government agency can do, or the laws governing firms such as AIG will change due to this ruling.
But as you yourself say, he said that in the absence of government intervention, AIG would have gone belly up and the stockholders would have been left with nothing, which is why he granted no payment. Still, it is a strange reading of the cse. I suspect, though, that the laws regarding either what the FED or other government agency can do, or the laws governing firms such as AIG will change due to this ruling.
1
The article and most of the comments seem to miss a fundamental point. The judge did not find the AIG takeover "too harsh" or "misguided" IN ISOLATION. It was in comparison to the other bailouts, which were more like gold-plated, obligation-free welfare handouts. The judge's decision, although subtly, is really a critique of the whole bailout mentality.
6
I hope the headline for this piece turns out to be true, and that in the future there will be no taxpayer bailout for a company like AIG. Mr. Greenberg deserved jail time and the shareholders were owed exactly nothing. They bought stock in a company, and the company went belly-up. That's the way the cookie crumbles. Mr. Greenberg's audacity and egotism are outrageous. The only people that deserve any compensation are the workers at AIG who lost their jobs. Mr. Greenberg should have to compensate every single one of them.
7
Whether the Fed erred in not letting AIG make its staffing change decisions appears irrelevant to me, since the Fed has no defined regulatory role over insurance companies -- unlike banks -- and the net effect was to prevent shareholders from experiencing a 100% loss.
The Executive Branch's emergency powers under the Constitution are more than adequate to respond to the crisis of 2008.
The emergency actions taken by the Fed were equivalent to Lincoln's cancellation of habeas corpus and his unilateral spending authoriations during the Civil War. Emergency actions are by definition not reconciliable with day to day operations under ordinary conditions, and are (usually) defensible in court because their purpose is to prevent a permanent interruption in conditions and operations.
The Executive Branch's emergency powers under the Constitution are more than adequate to respond to the crisis of 2008.
The emergency actions taken by the Fed were equivalent to Lincoln's cancellation of habeas corpus and his unilateral spending authoriations during the Civil War. Emergency actions are by definition not reconciliable with day to day operations under ordinary conditions, and are (usually) defensible in court because their purpose is to prevent a permanent interruption in conditions and operations.
As is so often the case in the NYTimes, this article confuses more than it enlightens. What the judge ruled is that the Federal Reserve Act does not authorize the Federal Reserve Bank to acquire a borrower’s equity as consideration for the loan. In other words, the law allows the Fed to act as a lender of last resort, but it cannot take equity as compensation for making the loan. All that is necessary is for Congress to amend the Federal Reserve Act -- either to allow the Fed to take equity in such a case, or to allow the Treasury to act as lender of last resort. If the taxpayer is going to be asked to provide loans in crisis situations -- as it likely to be the case -- there is no reason for the taxpayers not to have the upside potential of an equity position in the company they are saving. And whatever is acting for the taxpayers should get the best deal it can consistent with the goal of stabilizing the financial system. All the verbiage about the Fed being "harsh" with AIG and treating it "unfairly" as compared to other companies is beside the point.
4
This is the crux of Wall St. v Main St. : “The court bizarrely expressed repeated sympathy for A.I.G. while failing to properly weigh the economic wreckage suffered by the American people,” Mr. Kelleher said in an email. “It’s the U.S. taxpayers that have been victimized here by A.I.G. when it acted recklessly, precipitated the crash of the financial system, took a $185 billion bailout, and then gave bonuses to some of the very same people who irresponsibly sold the derivatives that blew up the company.”
Those bonuses were and are the people's flashpoint of corporate disgust. And, this is where the "evil" alliance of Wall St. and the US administration consummated their enduring and endearing marriage of convenience.
Those bonuses were and are the people's flashpoint of corporate disgust. And, this is where the "evil" alliance of Wall St. and the US administration consummated their enduring and endearing marriage of convenience.
2
Yeah, only that is not true. The bonuses were given to people who were hired by the government to work at AIG and clean up the mess. The government promised them the money if they could trade down the book of derivatives at a minimal loss to the taxpayers. They were able to do so, and therefore the government-controlled AIG was obliged to pay them the bonuses they were promised when they were hired.
Who knows what backroom deals were negotiated with the big banks to keep the feds from seizing control. The simple solution to the entire mess and the impending future ones is to reinstate the Glass Steagall Act which worked.
As to Mr. Greenburg et al, he and his cronies should be in prison, not out spending their millions in ill gotten gains.
As to Mr. Greenburg et al, he and his cronies should be in prison, not out spending their millions in ill gotten gains.
2
That great silent scream from taxpayers and voters and citizens who still have a consciousness is the pain of having their democracy sold to the global, corporate raiders and thieves. They pick our pockets, buy our elections, our legislators to create their own law, and this ruling shows that they have clearly gotten to our Judges as well (if we didn't think so already.) It flips us the bird and tells us we can no longer count on suing or getting back for our losses. It tells us our national law is no longer but is now subject to the weaselling of poor judges even before TPP. Well, democracy, it was nice knowing you. You are only entitled to a penny on the dollar in recompense for corporate economic destruction. What was that about moral hazard making banks more cautious?
2
The federal government should not be able to compel a company to accept a bailout. However, like all lenders, the government has the right to set the terms by which it will lend money - even if those terms are draconian. The borrower has the option to accept the terms of that loan or seek a better deal elsewhere. But once the borrower accepts the lender's terms, it (or its executives) cannot retroactively try to change the terms to which the borrower agreed or file a lawsuit complaining that they did not like the terms. This appears to be what AIG's former executive is trying to do and, if it is indeed what he is trying to do, then the judge's decision not only sets a bad precedent but violates the basic principles of contract law.
43
It's really strange that people who criticized the bailouts are now criticizing a "ruling that could end all bailouts." Shouldn't this be a cause for celebration?
1
Hank will go to his grave a despised man by almost all who knew him. Was it all worth it?
1
People commenting here are missing the point that Goldman Sachs & the other big banks were behind the evisceation of AIG. Who do you think was whispering in Treasury Secty Hank Paulson's ear during the AIG crisis? Paulson was a former Goldman honcho whose offices record showed hundreds of phone calls & visits from GS execs during the financial crisis.
Yes, AIG was stupid to insure the big banks' toxic loan products but it was the big banks that purposely created the enormous load of toxic debt that created the problem. AIG shareholders got wiped-out while the big banks' shareholders were saved & suffered no consequences. And who do you think engineered that: THE BIG BANKS!
Two cheers for Judge Wheeler for helping to bring an end to this hypocrisy. And for hopefully ensuring that the US govt will no longer be an errand boy for the big banks, using the power of the govt to protect them while everyone else drowns in the results of their fraud & irresponsible greed.
Yes, AIG was stupid to insure the big banks' toxic loan products but it was the big banks that purposely created the enormous load of toxic debt that created the problem. AIG shareholders got wiped-out while the big banks' shareholders were saved & suffered no consequences. And who do you think engineered that: THE BIG BANKS!
Two cheers for Judge Wheeler for helping to bring an end to this hypocrisy. And for hopefully ensuring that the US govt will no longer be an errand boy for the big banks, using the power of the govt to protect them while everyone else drowns in the results of their fraud & irresponsible greed.
31
I have no sympathy for AIG but agree that Goldman et. al. should have received a huge haircut rather than face value.
4
I think you are missing a big part of the story. AIG did not itself create toxic investments that blew up, but without its willingness to insure those risks, Goldman et al. could never have played the game for so long or on such a large scale -- just as it is hard to imagine kingpin drug dealers gaining so much clout without being able to launder money through banks, or burglars able to make a good living without the existence of those willing to fence illegal property. AIG did an abysmal job of understanding the risk it took, and was evidently not smart enough to outfox the bankers. Nonetheless, it was paid and planned to make money by playing a crucial role in this epic disaster without ever really adding any kind of value at all for anyone except itself. Its shareholders deserve no special consideration. They were never intended to be the beneficiaries of a bail out, banks were because they, unlike AIG, actually need to exist for the economy to function. AIG didn't create the mess but its presence made it a lot worse. In a fair world, AIG shareholders would, in fact, have gotten nothing and been penalized for buying shares in such a woefully mismanaged company.
1
You're right that the banks' malfeasance needs punishment, no doubt about that. So do the ratings agencies that were essential to the working of the frauds; they need to be held accountable for their crucial parts in it. That said, it wasn't "stupid" of AIG to agree to insure these toxic products far beyond its ability to cover the policies. It was greed, the same motivator as for the other players in this sorry and criminal affair.
1
Goldman, AIG and their ilk must want to thank Mr. Greenberg for hoisting them on his own petard.
2
Perhaps this means we need to limit size. So in affect no institution is big enough to topple the system--Use the anti-trust laws more and expand them.
2
Oh, poor billionaire Hank Greenberg. So, he got his moral victory. Now, where is the relief for the Taxpayers who bailed-out the financial services industry?
Insurance companies are required to maintain the bulk of their Cash Reserves in marketable securities--of high quality. At the same time, because the insurance industry is separately regulated by the insurance commissioners in each of the fifty states, there is no nationwide regulation of the insurance industry. Well, AIG over-extended itself by guaranteeing, credit-default swaps--one of those "toxic assets"--for considerably more than the parent company's Net Worth. And to add insult to injury--the Taxpayer's injury--AIG placed much of those Cash Reserves in the "high-quality" bonds of other AIG subsidiaries, around the country. Dumb, and dumber.
So, AIG circumvented the insurance laws and over-extended itself like a drunk sailor. Since the company operated in perhaps 40-42 states, as well as 170 countries, its failure would have quickly spread The Great Recession worldwide.
Of course, the GOP is fighting to pare-back Dodd-Frank. which was intended to correct the risky activities that caused the financial meltdown. AIG execs still received excessive bonuses at the same time that the taxpayers lost their jobs, homes and life's savings. Where were the personal fines? The jail time? Banning executives for life from the financial services industry?
http://thetruthoncommonsense.com
Insurance companies are required to maintain the bulk of their Cash Reserves in marketable securities--of high quality. At the same time, because the insurance industry is separately regulated by the insurance commissioners in each of the fifty states, there is no nationwide regulation of the insurance industry. Well, AIG over-extended itself by guaranteeing, credit-default swaps--one of those "toxic assets"--for considerably more than the parent company's Net Worth. And to add insult to injury--the Taxpayer's injury--AIG placed much of those Cash Reserves in the "high-quality" bonds of other AIG subsidiaries, around the country. Dumb, and dumber.
So, AIG circumvented the insurance laws and over-extended itself like a drunk sailor. Since the company operated in perhaps 40-42 states, as well as 170 countries, its failure would have quickly spread The Great Recession worldwide.
Of course, the GOP is fighting to pare-back Dodd-Frank. which was intended to correct the risky activities that caused the financial meltdown. AIG execs still received excessive bonuses at the same time that the taxpayers lost their jobs, homes and life's savings. Where were the personal fines? The jail time? Banning executives for life from the financial services industry?
http://thetruthoncommonsense.com
1
Come ON!
Gamble with our money, lose our money, ask us for more of our money to make up the loss.
Does anyone wonder why we're cynical? and why we don't vote? and why we think the cards are stacked against us?
No one pays a price except the victims and that price is extracted more than once.
It's just depressing.
Gamble with our money, lose our money, ask us for more of our money to make up the loss.
Does anyone wonder why we're cynical? and why we don't vote? and why we think the cards are stacked against us?
No one pays a price except the victims and that price is extracted more than once.
It's just depressing.
1
This is precisely why everyone should vote. And, turn off the tube and Twitter, Facebook, and forget about the Kardashian's. Go to the library, it's free. You can borrow books online and that is also free. It is a real indictment of this country that the Enquirer is the largest selling periodical. It would also help of the rest of the states would initiate mail-in voting like Oregon.
Standing around wringing your hands just feeds into the ascendancy of the 1% and their corrupt lackeys in Congress. We need to throw them all out on their (r)ears and start anew if we are to survive as a democracy.
Standing around wringing your hands just feeds into the ascendancy of the 1% and their corrupt lackeys in Congress. We need to throw them all out on their (r)ears and start anew if we are to survive as a democracy.
The big banks should have been treated the same as A.I.G.
1
The Kochs pay for the Mercatus Center at George Mason University, which the media inevitably fail to mention. (The fact that a hardline political advocacy/propaganda machine can be set up within a state university is rather disgraceful.)
Otherwise, no surprise to see that the wealthy can buy the legal decision they seek if they are determined enough.
Otherwise, no surprise to see that the wealthy can buy the legal decision they seek if they are determined enough.
4
It may not be fair to criticise the ruling, as the judiciary's 20/20 vision comes entirely from hindsight. However, the rationale for the Federal Government's intervention may, perhaps, have been better explained to the Court.
At a time when the financial services industry was running amuck, with virtually non-existent regulatory controls in place, the stakes were just too high for the government to twiddle its thumbs and do nothing! The price taxpayers would have had to pay (had AIG folded up) would have been way too high!! The crisis would have impacted the global economy and taken a much longer time to unravel. As for Mr. Greenberg - he should be ashamed of himself!!!
At a time when the financial services industry was running amuck, with virtually non-existent regulatory controls in place, the stakes were just too high for the government to twiddle its thumbs and do nothing! The price taxpayers would have had to pay (had AIG folded up) would have been way too high!! The crisis would have impacted the global economy and taken a much longer time to unravel. As for Mr. Greenberg - he should be ashamed of himself!!!
1
This is a victory for Greenberg's ego with unknown future consequences. Shame on him and his advisors for even bringing this case.
Judge Wheeler is clearly a lackey corporatist who happens to occupy a position of authority where he can rule for corporations any time he wants to. He should actually be jailed for corruption.
But even if he is a crook, this case may well inadvertently offer something that is good: no corporate bailouts at all.
I have always wondered why private sector corporations required taxpayer subsidies to keep their businesses going. After all we hear from the crony capitalists about "free enterprise," in reality most "private" sector corporations are subsidized by government funding, even to the existence of their company! That, folks, is what we call corporate welfare, and this case show a prime example of it. Goldman Sachs in another such example, as is just about any financial corporation in existence.
Stop it altogether. Never Again. Remember Pearl Harbor!
But even if he is a crook, this case may well inadvertently offer something that is good: no corporate bailouts at all.
I have always wondered why private sector corporations required taxpayer subsidies to keep their businesses going. After all we hear from the crony capitalists about "free enterprise," in reality most "private" sector corporations are subsidized by government funding, even to the existence of their company! That, folks, is what we call corporate welfare, and this case show a prime example of it. Goldman Sachs in another such example, as is just about any financial corporation in existence.
Stop it altogether. Never Again. Remember Pearl Harbor!
2
And who do you think appointed this wing nut? This isn't his first ridiculous ruling and it won't be his last.
Incompetence breeds incompetence.
Incompetence breeds incompetence.
1
"In A.I.G. Case, Surprise Ruling That Could End All Bailouts"
Might, but also might not. We'll know for sure after all the appeals are handled. I wonder if there will be an effect on our politicians, and how we are governed?
In the overall scheme of things, a little more regulation might go a long way.
Might, but also might not. We'll know for sure after all the appeals are handled. I wonder if there will be an effect on our politicians, and how we are governed?
In the overall scheme of things, a little more regulation might go a long way.
2
Write you congressman and demand the reinstatement of Glass-Steagall, the law from the 30s passed in the wake of the Great Depression that kept the banks separate from the investment houses. Clinton led the charge to kill it off and that really worked out well for at least the 1%.
We bailed this company out and they sued the government. We bailed out the "too big to fail" banks and they complain about every regulation that is there or might come to pass. Yet, at this point in time, after wrecking our economy, the only reason these institutions are in business is because of our tax dollars. And these same institutions continue to charge us high fees, give us low interest rates on our money, try to find new ways to sink the economy at our expense, and one of them sues for what? Being rescued? Nothing like biting the hand that reaches out to help you.
These too big to fail banks and financial institutions ought to be broken up. Furthermore, the number of fees and the size of those fees ought to be reduced. They are not serving us well when we can't move our money when we want to without incurring charges. They are not serving us well when they don't give us good advice, cannot keep track of who owns what because of all the slicing they did. Maybe the real question is who is being financially irresponsible here; the US or the financial industry. Opinions on both sides are probably correct.
These too big to fail banks and financial institutions ought to be broken up. Furthermore, the number of fees and the size of those fees ought to be reduced. They are not serving us well when we can't move our money when we want to without incurring charges. They are not serving us well when they don't give us good advice, cannot keep track of who owns what because of all the slicing they did. Maybe the real question is who is being financially irresponsible here; the US or the financial industry. Opinions on both sides are probably correct.
6
Another ALEC/Koch brothers judge heard from. There's a lot of house cleaning to be done to remove all these anti-government puppets from OUR democracy in the next elections. OUR government must be able to stop thieves like AIG employees and board members who would destroy the world with their greed.
2
The judge got it right. The Executive branch has no right to seize property at will either corporate or a private individuals. This ruling does not prevent the government from engineering a bailout. All it requires is the consent of the party being bailed out. In AIG's case, consent would come from the shareholders or the board or directors. If they don't want it, let them go bankrupt.
The idea that the federal government can tell you what to do or seize your property and do it anyway should be repugnant to us all.
The idea that the federal government can tell you what to do or seize your property and do it anyway should be repugnant to us all.
5
Why can't people understand that "my private property" is a creation of the "federal government"? No government, no property. The more "property," the more "government" it takes to protect, register, and preserve it. I suppose you also think that if nobody paid taxes, we would all have more "money."
1
Please read the facts of the case. The government did not "seize" the assets; the Board did approve the deal; the Board could have turned down the deal and gone into bankruptcy where the shareholders would likely have salvaged nothing.
What is repugnant is the forum shopping that was allowed in that this judge chose to look at this case after the district court had flat turned it down. That alone raises serious questions about the motive and/or judgement of this "judge."
What is repugnant is the forum shopping that was allowed in that this judge chose to look at this case after the district court had flat turned it down. That alone raises serious questions about the motive and/or judgement of this "judge."
1
Uh, the Fed didn't seize a blessed thing. They offered a bailout--one with tough conditions, but since when does a company of beggars who beggared themselves get to be choosers?
At least the judge was bold enough not to award Greenberg a cent. I wonder what course this principled champion of our constitution and his associates at the off-shore Starr endeavor would have pursued had AIG not been bailed out?
I feel that death by firing squad would be appropriate punishment for top level AIG executives.
6
At the close of 2007. AIG had 562 billion of unhedged CDS contracts on its books, not all of which were bad, but enough that AIG couldn't pay the bad ones in full.
As I remember, AIG was in the process of negotiating haircuts with its credit default swap holders when Geithner and crew decided ALL of the CDS holders with valid insurance claims should be paid 100%.
This was viewed by some as a back door way to channel Federal money to the CDS holders, such as Goldman Sachs, some of whom were in financial difficulty, without directly handing it to them.
Perhaps Obama was showing his fealty to the well-off at the time, the same fealty that manifests itself in his vigorous push for free trade agreements such as the TPP that do NOT take on wealthy American agricultural interests but seek to help Big Pharma, Big Media.
And some people frame Obama as a "socialist".
As I remember, AIG was in the process of negotiating haircuts with its credit default swap holders when Geithner and crew decided ALL of the CDS holders with valid insurance claims should be paid 100%.
This was viewed by some as a back door way to channel Federal money to the CDS holders, such as Goldman Sachs, some of whom were in financial difficulty, without directly handing it to them.
Perhaps Obama was showing his fealty to the well-off at the time, the same fealty that manifests itself in his vigorous push for free trade agreements such as the TPP that do NOT take on wealthy American agricultural interests but seek to help Big Pharma, Big Media.
And some people frame Obama as a "socialist".
6
Color me shocked that ARS so misunderstands this case.
It's pretty simple, actually: the Fed was empowered to offer a loan for interest, as it did with many banks. It wasn't empowered to demand an ownership stake in the company. Judge Wheeler didn't suggest taxpayers should have offered AIG any deal at all, generous or not - the point was simply that ownership interest is not a lawful part of a deal.
Critics of bailouts argue that rescue efforts weren't harsh enough on the culpable executives. Heads should roll and compensation should be clawed back. Criminal acts should be promptly and fully prosecuted. Full stop. Critics don't wish the 'allegedly aggrieved' investors, mutual funds and pension funds that hold AIG stock in their diversified portfolios any harm. Given our corporate structure, stockholders, though nominally the owners of the corporation, are powerless to control it. Blame shareholders only if there is ownership control - and we all know there isn't.
As for the point about Fed regulatory supervision; the investment banks could be (and were) rescued only after becoming commercial banks. AIG could have, too, as the very unit responsible for the AIG disaster (AIG-FP) was a banking unit supervised by the federal Office of Thrift Supervision at the time of the crisis.
The court was absolutely correct to steer the Fed back to its proper role of lender of last resort, not politically-driven nationalizer of disfavored companies to sate an angry mob.
It's pretty simple, actually: the Fed was empowered to offer a loan for interest, as it did with many banks. It wasn't empowered to demand an ownership stake in the company. Judge Wheeler didn't suggest taxpayers should have offered AIG any deal at all, generous or not - the point was simply that ownership interest is not a lawful part of a deal.
Critics of bailouts argue that rescue efforts weren't harsh enough on the culpable executives. Heads should roll and compensation should be clawed back. Criminal acts should be promptly and fully prosecuted. Full stop. Critics don't wish the 'allegedly aggrieved' investors, mutual funds and pension funds that hold AIG stock in their diversified portfolios any harm. Given our corporate structure, stockholders, though nominally the owners of the corporation, are powerless to control it. Blame shareholders only if there is ownership control - and we all know there isn't.
As for the point about Fed regulatory supervision; the investment banks could be (and were) rescued only after becoming commercial banks. AIG could have, too, as the very unit responsible for the AIG disaster (AIG-FP) was a banking unit supervised by the federal Office of Thrift Supervision at the time of the crisis.
The court was absolutely correct to steer the Fed back to its proper role of lender of last resort, not politically-driven nationalizer of disfavored companies to sate an angry mob.
2
Naked credit default swaps are simply bets placed on other people's debts. It is like buying fire insurance on other people houses. To allow this is beneath stupid.
7
IMHO...
1- Maurice Greenburg should be in jail.
2- Judge Wheeler prescribes Lehman and Bear Sterns medicine for all next time? Sure, that should work.
3- Somehow, I don't see Wheeler's judgment prevailing when the next financial meltdown occurs.
1- Maurice Greenburg should be in jail.
2- Judge Wheeler prescribes Lehman and Bear Sterns medicine for all next time? Sure, that should work.
3- Somehow, I don't see Wheeler's judgment prevailing when the next financial meltdown occurs.
3
It's still the same old story...
"Steal a little and they throw you in jail
Steal a lot and they make you king
There’s only one step down from here, baby
It’s called the land of permanent bliss
What’s a sweetheart like you doin’ in a dump like this?"
bobdylan '83
"Steal a little and they throw you in jail
Steal a lot and they make you king
There’s only one step down from here, baby
It’s called the land of permanent bliss
What’s a sweetheart like you doin’ in a dump like this?"
bobdylan '83
8
The real travesty in this entire situation is that after the government took control of AIG, the boys at the Fed decided that their friends in the financial industry (Goldman, et al.) should be paid 100% on their ill-considered contracts (credit default swaps and the like) with AIG. Why were the bankers not subject to any haircut when the rationale used to force AIG's board to accept an 80% haircut (something is better than nothing) was equally applicable to them.
While the financial wizards will attribute this difference in treatment to the "sanctity of contracts," this is nonsense. Anyone who ever dealt with AIG knows that even in the best of times, they rarely if ever paid 100 cents on the dollar on their contractual obligations.
While the financial wizards will attribute this difference in treatment to the "sanctity of contracts," this is nonsense. Anyone who ever dealt with AIG knows that even in the best of times, they rarely if ever paid 100 cents on the dollar on their contractual obligations.
9
The "sanctity of contracts" only applies to their own. The contracts they have with employees in terms of benefits and pensions are up for grabs.
1
WE can't be certain how Wheelers ruling will affect the future if and when "too big to fail" companies like AIG beat a path to Washington for rescue--the very hub of big government which, when times are good, companies bristle at it's regulation, crying afoul of interference.
My prayer is that in the future, when the private jets carrying the executives ask to land is Washington they are denied. and let them pick themselves up or crumble without bail.
My prayer is that in the future, when the private jets carrying the executives ask to land is Washington they are denied. and let them pick themselves up or crumble without bail.
2
I'm thinking Judge Wheeler will soon retire and head on over to a big office at AIG.
3
This was a ruling by one judge -- and you can always find one judge who will say whatever you want. There will be more judges to come. Whatever the merits of the legal arguments, it was and is bad public policy for the federal government to take control of any company or financial institution. Yes, it's happened before and it could happen again. But the prospect of being able to escape bankruptcy by getting taxpayer money destroys the capitalistic model of risk/reward. We see the continuing consequences of the destructive policies of the GW Bush and Obama administrations as CEOs of banks "rescued" by taxpayers are earning tens of millions of dollars annually while the same banks continue to do the things that got them into trouble before. Plus ca change, plus c'est la meme chose.
1
bailouts of large banks, AIG and GM---only done to make unions happy, and keep connected billionaires from losing too much money! Worst political / economic decisions in 200 years.
2
I couldn't be more delighted. As a tax payer I have no desire to support Mr. Greenberg's poor judgement. We should have let his miserable over-leveraged company fail.
Chalk one up for the little guy.
Chalk one up for the little guy.
6
and lost somewhere in the cesspool of this are all the employees that lost their jobs as a result. How much did that cost the government/taxpayer? No mention of this!
6
There will be other bailouts. It doesn't matter what this judge, this congress or anyone else says, if bailouts are necessary in the future to avert a total collapse of the financial system and US economy once again, there will be bailouts. A future congress will have no choice but to change the law at that point or face the prospect that the Fed and Treasury will be forced by circumstances to ignore the law, again.
Wheeler chickened out - if he really believed in his position he would have awarded at least some of the money damages AiG sought. But can you imagine the uproar if he had given AiG a single cent? This ruling was a cop-out and this case a farce. But hey, at least Boies can now go buy himself a new jet with those legal fees.
Wheeler chickened out - if he really believed in his position he would have awarded at least some of the money damages AiG sought. But can you imagine the uproar if he had given AiG a single cent? This ruling was a cop-out and this case a farce. But hey, at least Boies can now go buy himself a new jet with those legal fees.
1
Ten years from now, this will die with a whimper. The money talks, and walks. A bullet to the head for all who benefited from this wreckage of America, a page from the 3rd world would benefit us all. Sometimes when the other person is cheating and holding all the cards, violence is the ONLY option.
Give us a list NYT.
Give us a list NYT.
Talk about having a gun to your head...who asked the taxpayers if we were willing to take on the risk of bailing out AIG?
6
From the start of the capitalist system, the excuse for investors' taking the lion's share of profit while people who actually worked got pittances was that the investors were "taking risks". So let them take risks. For working people (who face a few risks of their own) to do the labor, increasingly pay the taxes, and struggle to live on what they make to also bail out investors and CEOs when their frauds crash is absolutely unacceptable. It blurs the line between capitalism and just plain theft.
88
jb, the investors discovered that by growing really big they could shift the risk to the general public. The general public failed to have a government that effectively regulated investors to prevent this risk transfer. So, when disaster struck, the general public was on the risk and the general public paid.
If the general public doesn't want to bear the risk, the general public needs to elect a government that will prevent the investors from shifting the risk. The general public needs to demand that its government break up every financial institution - and any company - that has grown big enough to shift risk of failure onto the general public.
If the general public doesn't want to bear the risk, the general public needs to elect a government that will prevent the investors from shifting the risk. The general public needs to demand that its government break up every financial institution - and any company - that has grown big enough to shift risk of failure onto the general public.
1
"It blurs the line between capitalism and just plain theft."
You mean, there is a difference?
You mean, there is a difference?
1
As long as they are taking risks with their own money rather than others' money and livelihoods.
Am I reading this wrong, but if this ruling or its subsequent form stands, and makes bail outs a lot more expensive, and therefore, possibly less likely, isn't this somewhat a positive sign for those who oppose bail-outs, especially against the reckless banks and institutions? Strangely, it seems like the justification may be unpalatable but the consequences desirable to those who hated the bailouts.
5
AIG : Arrogance Incites Greed.
6
Justice, however it might be defined, is for those with enough money to seek it, indeed demand it.
When people go to law school and become lawyers, they are taught great respect for institutions, like large corporations. The whole process of absorbing legal reasoning inculcates exaggerated respect for the powerful and diminished concern about ordinary citizens. This, in turn, leads to overblown concerns about the rights of the powerful. The ordinary crimes of government against citizens get ignored or passed over lightly, while Mr. Greenberg, as a money bad plaintiff in this case, gets what he insisted on: a full and careful consideration of the legal points raised by his well paid attorneys.
Where is justice for the rest of us? Lying bent and broken beside the road. As Bob Dylan sang, we are "only a pawn in their game".
How much money do you have to seek justice? Well, that's how much justice you shall receive.
2
I assume Maurice Greenberg never heard the expression "biting the hand that feeds you". Insane.
5
I'm reminded of that scene in "The Godfather" where the lawyer Tom Hagen shouts, "My client deserves an apology, Senator! Apology!"
Did we at least apologize to them?
Did we at least apologize to them?
1
When the big players start going to jail, instead of getting bonuses, then perhaps, the American public will begin to regain some confidence in our government. I have never sensed the such public disgust in our institutions in all my 65 years.
8
If they cannot be bailed out, then they need to be broken up. You can't have it both ways.
2
They're not satisfied with most of our money. They want it all.
5
We are now seeing what the judiciary thinks of the 2008 bailout. The mess was so big, with so many conflicting interests, that the courts are not going to be able to make any sense of it.
But now with hindsight we can see that the Federal Reserve Bank and "Wall Street" were conducting a rogue corrupt scheme involving overvalued derivatives that would blow up in the public's face. Reserve Bank Chairman Greenspan warned about the danger but did nothing. Most of the decisions were orchestrated by the Goldman school of manipulative studies.
The first step was to determine that an accounting rule of "mark to market" had to be upheld at all costs.(compare this to Tim Gaitners" Basil III statement that banks should have 10 years to cure their capital problems).
This impaired all banks' capital. Now the Fed could bail out the banks and eliminate the caustic derivatives. First, a scapegoat had to be found.
It is anyone's guess as to why they chose Lehman Brothers, who held the same amount of derivatives as other depositories. This destroyed the stock market because Lehman was trading with all the other banks and no one knew what they would get back. Only taxpayer money could save the economy at this point.
But now with hindsight we can see that the Federal Reserve Bank and "Wall Street" were conducting a rogue corrupt scheme involving overvalued derivatives that would blow up in the public's face. Reserve Bank Chairman Greenspan warned about the danger but did nothing. Most of the decisions were orchestrated by the Goldman school of manipulative studies.
The first step was to determine that an accounting rule of "mark to market" had to be upheld at all costs.(compare this to Tim Gaitners" Basil III statement that banks should have 10 years to cure their capital problems).
This impaired all banks' capital. Now the Fed could bail out the banks and eliminate the caustic derivatives. First, a scapegoat had to be found.
It is anyone's guess as to why they chose Lehman Brothers, who held the same amount of derivatives as other depositories. This destroyed the stock market because Lehman was trading with all the other banks and no one knew what they would get back. Only taxpayer money could save the economy at this point.
1
AIG wrote insurance policies for investment bank mortgage obligation tranches, and when the doo doo hit the fan, could not fulfill it obligations. It should by all rites been left to go bankrupt. Sorry Mr Sorkin. The Fed should never have allowed these institutions to become too big to fail in the first place.
When Paulson and Co. bailed them all out, the pain was not felt by the true offenders; it was heaped upon the American people. Remember we were losing 800,000 jobs a month.
That's what I don't hear in this column: the true victims of this lawlessness were all the rest of us, nationwide.
When Paulson and Co. bailed them all out, the pain was not felt by the true offenders; it was heaped upon the American people. Remember we were losing 800,000 jobs a month.
That's what I don't hear in this column: the true victims of this lawlessness were all the rest of us, nationwide.
9
Actually, world-wide but yes you're correct.
1
And what would have happened to the tens of millions of people who had life insurance policies from AIG?
1
Yes, Mr. Greenberg showed incredible “chutzpah” in bringing this case in the first place. Everyone who knew or dealt with AIG under the many long years that Mr. Greenberg was CEO was well aware that no major decision, & most minor ones, was approved without Greenberg’s personal sign off. His degree of micro-management was legendary.
To imply that he was not fully part of the credit default swap business that ultimately tanked the company is nonsense. So for him to have the audacity to sue the government for bailing him and the other shareholders out is outrageous. Yes, it could have been done more skillfully (certainly the counter-parties should have been required to take meaningful haircuts), but one must remember the hyper-tense environment in which all this took place.
To imply that he was not fully part of the credit default swap business that ultimately tanked the company is nonsense. So for him to have the audacity to sue the government for bailing him and the other shareholders out is outrageous. Yes, it could have been done more skillfully (certainly the counter-parties should have been required to take meaningful haircuts), but one must remember the hyper-tense environment in which all this took place.
7
Only he was not CEO when the credit default business took place.
Remember, Eliot Spitzer had forced AIG to remove Greenberg as CEO. If he had still been in charge, it is very possible he would not have allowed these risky bets.
Remember, Eliot Spitzer had forced AIG to remove Greenberg as CEO. If he had still been in charge, it is very possible he would not have allowed these risky bets.
1
The business began while he WAS CEO, albeit not anywhere near the size it ended up being.
2
Thank you Judge Wheeler - and nothing will change. The Fed has far too much power that it was never intended to have. The Fed is 100% TO BLAME FOR THE RISE IN INCOME INEQUALITY these past 7 years yet Janet Yellen gives speeches about the dangers of income inequality. The system is broken and all the players suffer from cognitive dissonance and this judge's ruling will be filed away until the next financial crisis brought on by the Fed.
Greenberg belongs in prison. He made AIG into a RICO. He is in all ways an ingrate and a hog.
5
For all of those people that are happy to see US Financial Institutions fail, consider where you will get your loans / mortgages from if there is no JPMC, BofA, or Wells Fargo. Consider the reality that as much as you might have distaste for US Bankers, how well will you fare when you have to get a loan from Bank of China or a Russian bank? What will those terms be like? Be careful what you wish for, because you just might get it.
1
No one likes the idea of too big to fail. However, the reality of the situation is that organizations in this category exist and will continue to exist for the foreseeable future. In times of economic crisis, the government needs all the tools in can muster. The idea that the government will not and should not be able to intervene in future situations where the damage to the economy would be catastrophic is frightening. While the actions of the government in response to the events of 2008 may have rankled conservatives, they were necessary. Capitalism like the Constitution is not a suicide pact.
1
The important thing is that Goldman Sachs never lost a penny on the trillions of dollars of worthless bets it placed on AIG. After all, losing on bad bets is for little people. Why bother losing when your partner runs the Treasury Department?
6
The regulators accepted the ownership of credit default swaps on any security as the equivalent of an AAA rating of the credit quality of the security. Either the insuror or the insuree was going to have to take the hit when the house of cards fell down from the weight of all the side bets on these securities.
Doubtless, a pinnacle in the annals of moral hazard.
5
Banks breaking laws are too big to fail. Bankers breaking laws are too rich to jail. What's a fellow to do?
5
AIG's sale of naked credit default sawybessentially created a financial casino that collapsed in 2008.
No credit default swap should be payable to anyone who does not have the insured security to swap for it.
No credit default swap should be payable to anyone who does not have the insured security to swap for it.
2
Any article about a judge or justice should mention which president appointed him/her because it tells us something important about the consequences of electing our presidents.
Or perhaps you assumed that, based on the judge's ridiculously anti-government analysis, your readers would easily guess that he was a George W. Bush appointee...
And the decision must have been animated by anti-government sentiment. When vulture capitalists "rescue" failing companies by selling off the pieces, no one sheds a tear for the shareholders of the failing company because a) their business failed and b) the market is (theoretically) finding a more efficent use for the capital. But when the government succeeds at rehabilitating a failing company and makes a profit, that runs completely counter to the conservative narrative of government being incompetent and incapable of running anything.
The problem with this ruling is that EVERY failing company that gets rescued - whether by a private or government entity - is over a barrel. The failing company has a choice between getting very bad terms and getting nothing. This ruling thus adds a fair amount of uncertainty to the mix for corporate takeovers of failing companies (though concededly the absence of damages mitigates that uncertainty).
Or perhaps you assumed that, based on the judge's ridiculously anti-government analysis, your readers would easily guess that he was a George W. Bush appointee...
And the decision must have been animated by anti-government sentiment. When vulture capitalists "rescue" failing companies by selling off the pieces, no one sheds a tear for the shareholders of the failing company because a) their business failed and b) the market is (theoretically) finding a more efficent use for the capital. But when the government succeeds at rehabilitating a failing company and makes a profit, that runs completely counter to the conservative narrative of government being incompetent and incapable of running anything.
The problem with this ruling is that EVERY failing company that gets rescued - whether by a private or government entity - is over a barrel. The failing company has a choice between getting very bad terms and getting nothing. This ruling thus adds a fair amount of uncertainty to the mix for corporate takeovers of failing companies (though concededly the absence of damages mitigates that uncertainty).
2
“No matter how rationally A.I.G.’s board addressed its alternatives that night, and notwithstanding that A.I.G. had a team of outstanding professional advisers, the fact remains that A.I.G. was at the government’s mercy,” the judge wrote.
What about the millions of homeowners and low to minimum wage workers who were at the mercy of our capitalistic machine for years because of the financial crisis? The people who lost their jobs and, if lucky, became underemployed after the fact - where are their damages? The only "people" at the government's mercy are those unfortunate people born into poverty who depend on tax-funded, government programs, which would be swept away at a moments notice if insufferable people like Mr. Greenberg had their way. This moral victory for Maurice is an incredibly depressing result for the rest of us.
What about the millions of homeowners and low to minimum wage workers who were at the mercy of our capitalistic machine for years because of the financial crisis? The people who lost their jobs and, if lucky, became underemployed after the fact - where are their damages? The only "people" at the government's mercy are those unfortunate people born into poverty who depend on tax-funded, government programs, which would be swept away at a moments notice if insufferable people like Mr. Greenberg had their way. This moral victory for Maurice is an incredibly depressing result for the rest of us.
2
Yes, how about the citizens?
Given that Wall Street and private enterprise is primarily if not exclusively driven by the desire to make money (and always will be), the disaster of 2008 was caused by a failure to properly regulate and govern our financial markets. Citizens need to start demanding real, substantive, comprehensive, aggressive regulation. These investment banks and AIG should not have been permitted to create a situation where the public would need to bail them out. This means taking our job seriously as an electorate, and realizing that our public servants who protect us from the risk of financial collapse are heroic not leeches.
Letting AIG go down the drain would have been cutting off our nose to spite our face. The Fed did the right thing to stabilize the economy. The alternative is on the big screen this summer: Mad Max - Thunder Road. Citizens should make sure bailouts don't happen by preventing the need for bailouts through good governance.
Given that Wall Street and private enterprise is primarily if not exclusively driven by the desire to make money (and always will be), the disaster of 2008 was caused by a failure to properly regulate and govern our financial markets. Citizens need to start demanding real, substantive, comprehensive, aggressive regulation. These investment banks and AIG should not have been permitted to create a situation where the public would need to bail them out. This means taking our job seriously as an electorate, and realizing that our public servants who protect us from the risk of financial collapse are heroic not leeches.
Letting AIG go down the drain would have been cutting off our nose to spite our face. The Fed did the right thing to stabilize the economy. The alternative is on the big screen this summer: Mad Max - Thunder Road. Citizens should make sure bailouts don't happen by preventing the need for bailouts through good governance.
1
Were there a scrap of justice in the world, the judge would have tossed Mr. Greenberg into prison and distributed every penny that smug megalomaniac owns to the thousands of working families and taxpayers he and his ilk robbed. Why on earth do we continue to transfer taxes on labor to the one percent and entrust the management of the national currency to the so-called "financial industry"? They are a closed circle of predators, sociopaths, national traitors, and class criminals. They produce nothing, steal everything, then carve their names on libraries, museums, hospitals, and universities.
8
Too big to fail should mean too big, period. The big banks should have been broken up in 2008; with this ruling, the government should act so that when the next financial storm hits, the bad actors can be thrown overboard without sinking the ship.
2
I wish, that in his entire and completely remarkable life, Hank Greenberg would have done something good for society. For him, it's always been about Hank Greenberg and only Hank Greenberg.
2
So is this consistent with the "Ayn Rand" ideology of certain conservative sages?
What AIG was doing was running a gambling business where nobody cared about insurable interest. It was a way of making insiders gobs of money without creating anything of use or of value.
The government made two inexcusable mistakes. First it bailed out the banks without breaking them up and increasing their required capital and second it bailed out AIG in the first place.
Greedy rich men caused the crash. If their banks needed a bailout the government’s contribution in loans only should have been matched by money from the personal assets of those greedy rich men whose personal assets would be under government lien until the government was repaid.
These guys had no skin in the game and believed that the taxpayers should gift them with a free insurance policy against their reckless conduct. You tend to be careful if you have personal responsibility; and isn’t that what starving people deserve for not doing. Or do they think being rich and greedy entitles people to special treatment.
The Court was wrong AIG was not treated harshly and their greedy men stole the govt money and pocketed it but the court was right there was no damage except to the taxpayers and 100% of nothing is nothing and the 20% went to the greedy in bonuses not the stockholders. As it turns out AIG was just a racket.
The government made two inexcusable mistakes. First it bailed out the banks without breaking them up and increasing their required capital and second it bailed out AIG in the first place.
Greedy rich men caused the crash. If their banks needed a bailout the government’s contribution in loans only should have been matched by money from the personal assets of those greedy rich men whose personal assets would be under government lien until the government was repaid.
These guys had no skin in the game and believed that the taxpayers should gift them with a free insurance policy against their reckless conduct. You tend to be careful if you have personal responsibility; and isn’t that what starving people deserve for not doing. Or do they think being rich and greedy entitles people to special treatment.
The Court was wrong AIG was not treated harshly and their greedy men stole the govt money and pocketed it but the court was right there was no damage except to the taxpayers and 100% of nothing is nothing and the 20% went to the greedy in bonuses not the stockholders. As it turns out AIG was just a racket.
2
Much ado about nothing. Correct result (no damages), but faulty analysis by the court. This flawed and poorly-reasoned decision will not survive appeal.
Only a judge appointed by George W. Bush would consider AIG in 2008 to be "at the government's mercy."
2
At the end of the day, the jig was up, no time to make any other kind of decision, save us or everyone looses, you , me, them.....
The taxpayer has the deepest pocket and the bankers know it, it's simply a matter of finding someone to assist...
It happened in 2008 and will happen again, there are no protections in place strong enough to go against human nature
The taxpayer has the deepest pocket and the bankers know it, it's simply a matter of finding someone to assist...
It happened in 2008 and will happen again, there are no protections in place strong enough to go against human nature
1
Is there any more proof that big business and government lie in the same bed? ALL branches of government, especially the judicial branch which we commoners expect to mete out justice where the others fail.
1
There should have been NO bailouts, period. The government should not have decided who to save (Goldman, AIG, GM) and who not to save (Lehman). The government should only have moved to save customers. If we had a problem with banks that were "too big to fail" we now have bigger financial monsters that will never be allowed to fail. Too few executives had to feel the real financial pain, personal disgrace and even loss of personal freedom, of having their company disappear because of their reckless and often illegal management. If GM would have closed other companies would have picked up the pieces and the market share, which would have required them to hire many new workers. We moved many steps towards a more centrally directed economy and only politically connected companies benefit from that.
8
How could they have saved the customers without saving the companies? The companies are the only ones who have the staff, the computerized records, and the operations to service the customers. If AIG had failed, nobody would even know whether you had a life insurance policy with them or not. Imagine the government trying to straighten out 50 million global claims. They don't have the skills or manpower to do it.
First the good news, the plaintiffs will not receive any money as result of the government bailout, and if this decision is upheld by either, a full en banc hearing by the Federal Court of Appeals, or the SC, maybe it will serve as a lesson to the private financial sector that no one is TBTF.
As a staunch opponent of TARP, I could not ask for a better outcome, and this decision also validates the opinions of a diverse cross section of Right and Left Wing opponents of TARP, such as Senators Shelby, Feingold, and Sanders, as well as then Kansas FED President, Thomas Hoenig, who believed a resurrection of the S & L structured RTC would be more than capable of handling the current crisis.
As to the chief instigator behind the current lawsuit, Maurice Greenberg, who was largely responsible for AIG's precarious financial situation and was ousted from the firm in 2005 for financial irregularities; I am pleased that he will not see a dime, but I certainly wish he was convicted and sentenced to at least serve a "dime" for his role in creating the financial crisis.
Finally, what I do not understand about the Judge's ruling in the AIG case is the primary product that placed AIG in virtual bankruptcy was its exposure in the CDS markets, a market which passage of the CFMA of 2000 made completely opaque, the ability to generate enormous profits, yet still subject to federal oversight; Greenberg was happy with the former, not so much with the latter, and the Judge agreed.
As a staunch opponent of TARP, I could not ask for a better outcome, and this decision also validates the opinions of a diverse cross section of Right and Left Wing opponents of TARP, such as Senators Shelby, Feingold, and Sanders, as well as then Kansas FED President, Thomas Hoenig, who believed a resurrection of the S & L structured RTC would be more than capable of handling the current crisis.
As to the chief instigator behind the current lawsuit, Maurice Greenberg, who was largely responsible for AIG's precarious financial situation and was ousted from the firm in 2005 for financial irregularities; I am pleased that he will not see a dime, but I certainly wish he was convicted and sentenced to at least serve a "dime" for his role in creating the financial crisis.
Finally, what I do not understand about the Judge's ruling in the AIG case is the primary product that placed AIG in virtual bankruptcy was its exposure in the CDS markets, a market which passage of the CFMA of 2000 made completely opaque, the ability to generate enormous profits, yet still subject to federal oversight; Greenberg was happy with the former, not so much with the latter, and the Judge agreed.
1
The Judge simply ruled the Fed did not have the authority under the Fed Reserve Act to take an equity position in AIG. So Greenberg shot himself in the pocket book. By getting that ruling the Judge explained Greenberg destroyed his "taking" claim. So no money for that claim either. What kind of trial strategy pursues a claim that destroys your other claim? See page 6 and 7 of the opinion. Any comment from Mr. Boies?
3
Bizarre ruling at best. Worse yet, gives the selfish despot Greenberg bragging rights. Bald-faced denial that all he ever did was fail miserably. Then sue. I vote him off the island......90 year old jerk......fortunately he wont have a second opportunity to shame himself.....
2
Too big to jail, too big to bail.
We need more oversight, more legal accountability for executives, and certain criminal penalties for the type of reckless disregard of fiduciary duty and outright criminal theft.
We should give Elizabeth Warren complete authority to re-write the authority of the Fed, the Treasury, and the system which allows these dangerous games in the banking and reinsurance industries. Selling worthless paper and collusion of ratings agencies caused trillions of dollars of loss of home equity and financial portfolios of innocent investors.
We must not let this happen again. The threat of long prison sentences for the executives who commit this fraud and theft must be made crystal clear and absolutely certain. Greenberg, Diamon, and 20 others should be sitting in prison today, not testifying that the public is too stupid to understand the business of fleecing and collateral debt obligations.
We need more oversight, more legal accountability for executives, and certain criminal penalties for the type of reckless disregard of fiduciary duty and outright criminal theft.
We should give Elizabeth Warren complete authority to re-write the authority of the Fed, the Treasury, and the system which allows these dangerous games in the banking and reinsurance industries. Selling worthless paper and collusion of ratings agencies caused trillions of dollars of loss of home equity and financial portfolios of innocent investors.
We must not let this happen again. The threat of long prison sentences for the executives who commit this fraud and theft must be made crystal clear and absolutely certain. Greenberg, Diamon, and 20 others should be sitting in prison today, not testifying that the public is too stupid to understand the business of fleecing and collateral debt obligations.
2
The judge is wrong, The reality is money is not worth anything unless the government guarantees it. See section 8 of the United States Constitution. Remember the Constitution was written before rules of grammar and punctuation became the normal.
1
If we ever live to see another worldwide financial panic like 2008, I hope the Fed and other federal agencies are creative and fearless and not dissuaded by fear of litigation. When the world financial system is at stake, making AIG shareholders happy is not the policy goal. The Fed under Ben Bernanke acted decisively and saved everybody's bacon. If it weren't for actions like the AIG takeover, the world financial system would have essentially burned down, and a lot of us would be living in refugee camps eating tortillas and beans.
2
This is largely nonsense. In a financial crisis when panic surrounds markets the government acts, nobody argues very much and there is some sweeping up of the blood afterwards when everyone feels warm and safe again. Whatever Greenberg says he hardly won when the court declined to give him a dime. Personally I found the judge's logic bizarre (creditors or those providing debtor in possession financing are constantly taking control of institutions) but in the event of another major crisis I don't see it having much impact in the real world.
2
Maybe Judge Wheeler is on to something with his pretzel logic. He has admonished U.S. taxpayers, but not punished them. In other words, AIG was a learning experience. And I see no reason why this ruling would prevent a future bailout, especially given how well it worked. Said future bailout just needs to conform to Judge Wheeler's ruling, which would be simple if Congress wasn't controlled by alarmist-petty-petulant Republicans.
11
I disagree, which will be sad for Americans. AIG should have been treated at Lehman Brothers was -- let them go under. The resulting worldwide economic collapse would have hurt so many that reforms and protections would look appealing even to Wall Street--as they did after The Great Depression. Unbelievably painful, but apparently the only way to effect change in Wall Street's behaviors.
Yet another symptom of how the nation is rigged for the benefit of the super-rich at the expense of everyone else.
4
Since the government action was illegal, everyone who benefited from it --- the shareholders who kept 20%, the executives who got their bonuses, ... --- should have to pay back their gain.
3
What about the taxpayers, who made $20 billion on the AIG bailout? Do you want to give that back?
1
Pension funds, including government pension funds, lost millions and the US Treasury made a $22.7billion profit on the transaction. Why wasn't the bailout a loan rather than a taking of the stock, as Greenburg argues? The bank bailouts also tuned a profit for the government but being structured as a loan the shareholders survived. The government made a profit on the Bank bailout too.
2
A person just isn't shocked by these kinds of rulings any more. I think the American people have reached the tipping point of caring. A dangerous thing.
3
This case merely demonstrates the revisionist universe that Mr. Greenberg and his ilk inhabit: a universe where the government is the enemy and where Wall Street would have been just fine if the government had stayed out of it.
Well, Mr. Greenberg, be careful for what you wish. The government may not be there the next time you need to be saved from your foolishness.
Well, Mr. Greenberg, be careful for what you wish. The government may not be there the next time you need to be saved from your foolishness.
8
"...While the ruling is likely to be appealed..."
More costly litigation, please. The taxpayer may, or may not, get screwed. But the lawyers must get paid.
More costly litigation, please. The taxpayer may, or may not, get screwed. But the lawyers must get paid.
5
"For years, critics of the bailouts during the financial crisis argued that the rescue efforts weren’t harsh enough. The chief executives of failing institutions should have been prosecuted and jailed. The largest financial institutions should be been temporarily nationalized and broken up."
Fixed it.
Fixed it.
5
If we, the taxpayers, no longer "bailout" the TBTFmfr's, we should be able to break them up and nationalize the pieces when their crimes get them in trouble again. Maybe Wheeler is shrewder than he appears.
1
Perhaps the AIG's of the world will watch their P's and q's more carefully going forward if their shareholders are going to take the hit for AIG's being stupid aggressive.
8
I read the opinion, and a few things stand out. The first is the court's focus on AIG's lack of recourse -- as if AIG had a proverbial gun to its head because of the government's corporate extortion. This is just ridiculous. The fact that the board accepted the terms should by itself exclude the possibility of damages. Corporations are not in fact people and threatened bankruptcy isn't the same as threatened bodily harm. Losing all their money is a risk they took as soon as they bought the stock. Besides, a corporation with teams of lawyers can get a TRO to clarify the scope of authority of the U.S., and if the court agreed that no equity could be extracted and the U.S. really considered it important to bail out AIG, it would have changed the terms. AIG didn't even try this route. Instead, it took the benefit of the bail out and then complained about the terms. Whether the Federal Reserve had the authority to impose these particular terms is a separate issue, but there is likely nothing to prevent Congress from giving the Federal Reserve discretion to extract equity in return for a bail out. It also has the power to ensure that if a deal is accepted by the entity's governing body, it is not reviewable by a court. Congress does this for different federal programs, and even if it should not be the norm, it seems absolutely appropriate in the case of taxpayer bail outs. AIG, that bail out was for the benefit of taxpayers not you.
17
AIG didn't bring this action, Greenberg did. AIG was a defendant until it was dropped before trial. And no court would consider a TRO during a negotiated bailout between a government entity and a private company. And Congress could have given the Fed the authority to take an equity kicker but it didn't, and still hasn't. Without specific statutory authority even the Fed's outside lawyers recognized the equity kicker was problematic. And the Fed has never taken an equity kicker in any other loan bailout, nor since. The AIG deal was sui generis in many respects.
Instead of lamenting Judge Wheeler's decision, we should take measures to throw Wheeler and his decision into the trash can. This is such a patently corrupt bit of nonsense that we are all nauseated. Judges are not without greed and their reason is swayed by the human weaknesses that can impair judgment to the harm of all. Witness the Supreme Court decision of Bush v Gore.
14
No more bailouts would be a welcome unintended consequence of this suit to be sure but with rich and connected banks and financial institutions where there is a will there will be a way to protect their greed and incompetence.
4
Nothing will change until the wealthy who are reckless & insatiably greedy, who commit fraud and break the law lose everything and are thrown in jail. The judge is clearly an idiot in the pocket of the 1%. The lawyer who argued for Greenbug is also despicable. Over centuries, nothing changes.
9
There are plenty of blame to go around. The rich and wealthy might be easy targets, but let's not point fingers so soon when even those in the lowest strata in society was jumping on the bandwagon of the subprime market. It's not unlike the Greece case now, when Greece would point fingers at Germany for inflicting pain on them, but Greece never for once looks back and reflects on the fact that while Germany and others might be the enablers, the Greeks borrowed money willingly, funding a lifestyle they could not have otherwise afforded.
Stopping this kind of large scale bailouts would be a good start, to give these companies pause, that they could indeed collapse and no one would be there to save their skin. As taxpayer, I for one don't want to see this kind of AIG bailouts happens again, ever.
Stopping this kind of large scale bailouts would be a good start, to give these companies pause, that they could indeed collapse and no one would be there to save their skin. As taxpayer, I for one don't want to see this kind of AIG bailouts happens again, ever.
One of the central problems here is that the government’s regulators were caught flat-footed by the 2008 financial crisis. They did not have a plan for addressing that type of financial failure, which means they either did not understand the industry they were regulating or they were captured by the industry they were regulating.
As most regulators were former leaders of the industry they were regulating, or very close to it, the roots of the failure seem obvious.
The judge states “The government’s unduly harsh treatment of A.I.G. in comparison to other institutions seemingly was misguided and had no legitimate purpose,” which suggests regulatory capture by certain financial institutions, not the entire industry. In other words institutions like Lehman and AIG were treated differently than others. Questioning that in the judicial system is healthy in my opinion.
If the end result is more hesitancy of the government to intervene, that is a good thing. As we all learned in business school, core to the idea of the sophisticated investor being less regulated is the fact that they must deal personally with moral hazard—that is to say personally experience the results of their investment strategies—both good and bad—not off load their bad investments onto the public when the results of their investment decisions head south.
Unfortunately, it will take another financial crisis to see if we have really learned anything from the Great Crisis.
Michael Bain
Glorieta, New Mexico
As most regulators were former leaders of the industry they were regulating, or very close to it, the roots of the failure seem obvious.
The judge states “The government’s unduly harsh treatment of A.I.G. in comparison to other institutions seemingly was misguided and had no legitimate purpose,” which suggests regulatory capture by certain financial institutions, not the entire industry. In other words institutions like Lehman and AIG were treated differently than others. Questioning that in the judicial system is healthy in my opinion.
If the end result is more hesitancy of the government to intervene, that is a good thing. As we all learned in business school, core to the idea of the sophisticated investor being less regulated is the fact that they must deal personally with moral hazard—that is to say personally experience the results of their investment strategies—both good and bad—not off load their bad investments onto the public when the results of their investment decisions head south.
Unfortunately, it will take another financial crisis to see if we have really learned anything from the Great Crisis.
Michael Bain
Glorieta, New Mexico
6
Except the article makes clear that the reason for the different treatment was that the laws were different.
The problem with your reasoning, as I see it, is that the severe consequences of the financial crisis would have rained down even harder on the average taxpayer as we tried to glue our economy back together.
If the government cannot intervene without "harming" a rich invested and former CEO of a major contributor to the crash then what options do we have?
Personally, I'd like to see one massive perp walk by the people show stole an enormous amount of wealth from the American people and did not have to suffer any consequences for their morally depraved behavior and its results.
If the government cannot intervene without "harming" a rich invested and former CEO of a major contributor to the crash then what options do we have?
Personally, I'd like to see one massive perp walk by the people show stole an enormous amount of wealth from the American people and did not have to suffer any consequences for their morally depraved behavior and its results.
1
No one had a plan because no one had ever foreseen the markets could and would collapse like dominoes like what we saw around 2008/9. And thanks to the likes of Greenspan who had kept interest rate incredibly low even during good days, thereby building fluff in the markets (both stock and property), that the train wreck became too big for anyone to ever think of stepping in front of the train to stop it.
It's indeed sad, that us taxpayers have become so used to taking the fatalistic view that systemic collapse is bound to happen. The so-called black swan events that are supposed to be once-in-a-century are now happening like 7-10 years. (Next one up will probably be in China, even though no one wants to believe it could ever collapse, but once of these days, the bubbles in markets become so big that the tail will wag the dog, and even the trillion-dollar reserve that Beijing holds might not be able to save it from ugly and messy end.) All we're doing now, seven years after the Great Recession starts, is to roll back regulations like the Dodds-Frank Act. And we're talking about all these being "unavoidable"???
It's indeed sad, that us taxpayers have become so used to taking the fatalistic view that systemic collapse is bound to happen. The so-called black swan events that are supposed to be once-in-a-century are now happening like 7-10 years. (Next one up will probably be in China, even though no one wants to believe it could ever collapse, but once of these days, the bubbles in markets become so big that the tail will wag the dog, and even the trillion-dollar reserve that Beijing holds might not be able to save it from ugly and messy end.) All we're doing now, seven years after the Great Recession starts, is to roll back regulations like the Dodds-Frank Act. And we're talking about all these being "unavoidable"???
2
Of course this Alice-in-Wonderland decision by federal Judge Wheeler makes no sense and has nothing to do with justice, especially justice for all.
Maybe Judge Wheeler is positioning himself for an appointment to the Supreme Court, should a Republican win the presidency in 2016.
“There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice.” (Montesquieu, "The Spirit of the Laws," 1748)
Maybe Judge Wheeler is positioning himself for an appointment to the Supreme Court, should a Republican win the presidency in 2016.
“There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice.” (Montesquieu, "The Spirit of the Laws," 1748)
62
More likely he's angling for a future Board seat at AIG, or a senior executive appointment.
Sorkin ignores that we already have a legally binding bailout approved by Congress. In fact we have had it for decades. It is things like the Federal Reserve serving as lender of last resort for member banks,, the FDIC, the PGBC. More broadly we have Social Security, Medicare, Medicaid, and now Obamacare. Furthermore, there are always other options if a bailout is needed. There was a very good idea being floated during the financial crises that called for taking the $700 billion approved by congress and start several new banks with totally clean balance sheets. Then as the economy re stabilizes they could sell off those banks.
You can argue the benefits of bailing out some private entity via the government taking an equity stake. But if the courts rule that it is illegal, its not that big of deal. The economy is not going to altogether stop if the various government agencies do its job. And in the long run its probably just as well.
You can argue the benefits of bailing out some private entity via the government taking an equity stake. But if the courts rule that it is illegal, its not that big of deal. The economy is not going to altogether stop if the various government agencies do its job. And in the long run its probably just as well.
Perhaps the bright side to Judge Wheeler’s ruling is that “too big to fail” may now mean “too big to bail out.” The only error the Fed made when it took over AIG was not breaking it up. Hopefully an appeal is in process and Wheeler’s ruling can be examined by more logical heads.
2
The financial crisis of 2008-2010 influenced too much the American economy. I believe he countries with smaller economy had fewer problems! So as a result there's a large amount of people who lost their fortune and therefore lost their beliefs in the State and the system!
Greenberg and his clique sold credit default swaps which they had no chance of backing in an economic downturn. They sold insurance without the ability to cover the insured. That's fraud in any other business. Greenberg should have gone to jail.
7
These people (corporations and CEO's, who are people, too) need to be protected from themselves and we from them. Life is about choosing between alternatives. Asking for the government to decide between alternatives, one that more likely protects taxpayers and one that doesn't, I want my government to protect us, the taxpayers. Sadly, lobbyists prove everyday that my wish is usually unfulfilled.
1
How is this not front page news.
2
At least in getting nada while paying David Bois millions, Mr. Greenberg and his Wall Street consortium (he did assemble a corporation of billionaires to pursue the case) now understand the meaning of 100% of zero.
Tough conference on investing in the appeal. They can call for term sheets. Probably cost 80% of residual and 12% imputed interest from some Wall Street entity.
Tough conference on investing in the appeal. They can call for term sheets. Probably cost 80% of residual and 12% imputed interest from some Wall Street entity.
3
It's a foolish thing to bite the hand that feeds you.
If I were a Wall Street plutocrat, I'd be pretty mad at Greenberg. Now when they crash the car playing chicken, dad won't be there to pick up the pieces.
If I were a Wall Street plutocrat, I'd be pretty mad at Greenberg. Now when they crash the car playing chicken, dad won't be there to pick up the pieces.
7
Isn't this (like) the Drowning Victim suing the LifeGuard that saved them (via Mouth-Mouth) for Sexual Assault?
2
Sometimes, the contradictions in a ruling by a court of law leaves us almost speechless. Almost, but not quite, thanks to Charles Dickens, who who put the words we seek in the mouth of Mr. Bumble, a character in Dickens' great novel, Oliver Twist.
"If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is a ass — a idiot."
"If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is a ass — a idiot."
5
Bailouts happened on both Bush and Obama's term, so it would be fair to say that this judge's ruling is something that is predictable though it wouldn't bring anymore economic advantage to the taxpayers. I would advice voters on the next general election to elect wisely the person who would have the courage and integrity to reform the system and not be fooled again with empty and false promises that Obama did in his election campaign.
The story here is of a court of claims judge who was in over his head. Nothing more.
It's ridiculous to think that state insurance commissioners are effective at all in regulating insurance companies. McCarran-Ferguson was passed in 1948!!!! The U.S. is filled with insurance companies that are barely regulated. A lot of them are based overseas or are small Lloyds funds. It's come out in New Jersey that insurance companies are acting fraudulently to avoid Hurricane Sandy claims. Probably a lot of these insurance company execs have sucked out the capital so that if there are substantial claims the companies won't have enough assets. Some of them are basically crooks for hire who specialize in witness intimidation and harass claims makers.
1
Here in Georgia we had severe hailstorms a few years back. While all my neighbors got new roofs for their homes, my home did not. The State Farm assessor told us that the storms had miraculously not been damaged while all of our neighbors were deemed in need of replacement by different insurers.
The same happened to my parents and a close friend living on the other side of town; they were also insured by State Farm. There is no protection from this kind of chicanery because of regulatory capture.
The same happened to my parents and a close friend living on the other side of town; they were also insured by State Farm. There is no protection from this kind of chicanery because of regulatory capture.
2
If the government wanted to prevent anything close to a bailout, Congress should reinstate the original Dodd-Frank as it was written and intended.
42
A confusing ruling but ... the idea that the government won't rescue a troubled "big" institution adds credence to Senator Sander's statement that the big financial institutions need to be broken up. Woe be to the American economy and financial markets should another one of these mega-companies fail.
1
This reminds me of the recent SC case where the family sued to ask that their child's passport be changed to reflect that the city of birth be assigned to a country favorable to that family's preferences. Notwithstanding that that family did not choose to actually live in the US, but just chose to try to take advantage of its nominal US citizenship to advance a political cause for its actual preferred citizenship. These kinds of people have no care for the harm their actions cause to the majority, so long as they receive a benefit for themselves.
1
These crooks have socialized their losses. The next crisis will be worse. We will never know how things would have been if these gangsters were left to fail.
2
After reading the decision, it appears what most troubled the judge was the dramatic change in the terms of the equity piece between the signing of the term sheet and the finalization of the credit facility agreement days later. Under the term sheet approved by the AIG board, the Fed and the NY Fed, the equity kicker was in the form of non-voting warrants with a $2.50 strike price, which required the Fed to pay $30 billion to convert the warrants to common stock. When the final agreement was presented to AIG this had changed to voting preferred stock with no strike price. And the lawyers for the government were concerned the government did not have the statutory authority to own equity in AIG and thus came up with the idea of a trust to avoid that bar. And the initial $85 billion credit facility was for only two years, which was later extended to five years when the government determined that was too short and would lead to a fire sale of AIG assets to pay back the loan rather than the more orderly liquidation of assets that eventually took place. So a two year loan included three loan points and 2.5 loan points every quarter thereafter, 12% interest and a 79.9% ownership with no equity payment. And these changes were made by the lawyers without first consulting the AIG board or getting new authority from the Fed and NY Fed boards. By the way, Greenberg left AIG in 2005, before the bulk of the bulk of the loans and derivatives that went bad were issued by AIG.
"By the way, Greenberg left AIG in 2005, before the bulk of the bulk of the loans and derivatives that went bad were issued by AIG." Wilburn Smith
He left a large chunk of his assets in AIG. He could in no way be construed as a duped, novice investor. He should have gotten 20% of nothing.
Contrast his position with that of homeowners who had paid off their mortgages entirely and somehow woke up one day to FORECLOSURE NOTICES on their homes. Now these were innocent investors foolishly believing that a bank wouldn't swop down and steal their life savings.
He left a large chunk of his assets in AIG. He could in no way be construed as a duped, novice investor. He should have gotten 20% of nothing.
Contrast his position with that of homeowners who had paid off their mortgages entirely and somehow woke up one day to FORECLOSURE NOTICES on their homes. Now these were innocent investors foolishly believing that a bank wouldn't swop down and steal their life savings.
1
Of course! Naturally! Without a doubt! Taxpayers should NEVER get their money back. Taxpayers should never take advantage of a Corporation and demand money. Small investors should never see their money again. Oh, well. Just another example of judicial non-caring and politicking. And mis-informed judgements. Do you suppose Judge Wheeler is angling for a position on the SCOTUS? Nah, of course not. Although he would fit right in to replace the "Silent Genius", Clarence Thomas.
1
Those believing that Judge Wheeler has placed the nation on a financial precipice are mistaken. This ruling, if upheld, only prevents the Fed from rescuing non-bank companies - which, as the judge noted, the Fed has no legal authority. The much more serious limitation on the Fed is the Dodd-Frank law preventing a bailout of any financial institution - including the largest banks. This is the law which truly endangers the country should another crisis occur because it will force the Fed to stand down as "too-big-to-fail" banks succumb one after another.
Thank you, Barney Frank, for this dismal ideologically driven legislation.
Thank you, Barney Frank, for this dismal ideologically driven legislation.
These days, any time I read a head scratching decision by a judge I immediately look up who appointed them to the bench knowingly pretty well in advance who that might be. Its not much of a surprise that Judge Thomas C. Wheeler's was appointed by a Republican, George W. Bush, ironically, the same guy who drove us into the A.I.G. mess in the first place.
2
Interesting to read what commentators who understand better have to say. A.I.G. reared its ugly head at a quiet dinner with an elderly artist in the Village in 2008. It was tempting to go on a pontificating lecture based on having observed a corporate economic office have exchanges with the Head of A.I.G. the decade before.
Something bad had happened is an understatement, and this former clerk remained silent, only suggesting that the economic fall-out of the Recession was going to impact first on the purchase of Art, as a pleasure and investment.
In meeting later with a financial adviser, he asked where were my life-time savings. In an annuity, I responded weakly, to which he compared this other insurance company to A.I.G. Rules have been put in place for this never happening again, I piped up. A roar on his part and of course I felt like a dolt.
Nothing amusing on this latest update from The Times, and wondering about the long-term effects and delayed reaction we are going to be seeing in the near future. 'Read' what others have to say here. Perhaps one will learn something new and not the hard way.
Something bad had happened is an understatement, and this former clerk remained silent, only suggesting that the economic fall-out of the Recession was going to impact first on the purchase of Art, as a pleasure and investment.
In meeting later with a financial adviser, he asked where were my life-time savings. In an annuity, I responded weakly, to which he compared this other insurance company to A.I.G. Rules have been put in place for this never happening again, I piped up. A roar on his part and of course I felt like a dolt.
Nothing amusing on this latest update from The Times, and wondering about the long-term effects and delayed reaction we are going to be seeing in the near future. 'Read' what others have to say here. Perhaps one will learn something new and not the hard way.
1
The US taxpayer was robbed to bail out AIG. The Constitution provides no authority to Congress to hand out taxpayer money to benefit a small group at the expense of taxpayers.
AIG should have gone bankrupt, and its shareholders and managers should have learned they made a mistake, and suffered the consequences. The US government should have let them learn - instead, the US government taught them that when they screw up royally, the taxpayer will bail them out. This is wrong, and should be corrected.
The Dodd-Frank bill should have been one sentence: "The US Government does not bail out companies that go belly-up." But as long as Congress continually ignores the Constitution and its limitations, that won't ever happen.
Throw them all out.
AIG should have gone bankrupt, and its shareholders and managers should have learned they made a mistake, and suffered the consequences. The US government should have let them learn - instead, the US government taught them that when they screw up royally, the taxpayer will bail them out. This is wrong, and should be corrected.
The Dodd-Frank bill should have been one sentence: "The US Government does not bail out companies that go belly-up." But as long as Congress continually ignores the Constitution and its limitations, that won't ever happen.
Throw them all out.
In my view, most commentators are overreacting here and there will be no serious consequences from this decision. It is an outlier that will almost certainly be struck down on appeal. Also, given the convoluted reasoning and obvious errors of fact and logic that many here picked up on immediately, this decision will possess no persuasive much less precedential value.
1
Commit fraud and win a law suit! Glad there were no damages awarded.
5
The idea that this ruling could end all bailouts is patently absurd. When the next bubble pops the size of the government bailouts will boggle the mind. The number and size of too big to fail financial entities is now bigger than ever. As to the concept that the government will be afraid of being sued, it is laughable.
2
The only terms under which a company should ever be bailed out by taxpayers are where the taxpayers end up owning the company. Is it "too big to fail"? Fine, we'll buy it.
It will be interesting to see if Goldman Sach's just announced new small lown business is just as "unfair" to the small lenders it sees as its targets
Good. All bailouts should cease. Outside of FDIC, taxpayers should not cover losses of gamblers on wall street.
While it was a private company, Goldman was risk averse. On taxpayer's dime, not so much.
While it was a private company, Goldman was risk averse. On taxpayer's dime, not so much.
Why do we seem to have such poor minds on the bench? The judge should've rebuked Greenberg and had the bailiffs throw him out of court.
1
The derivatives business of AIG was the pipe bomb at the core of the financial crisis that had to be defused to avoid the collapse of the world financial system. The $185.0 million funded by the US Treasury to make good on that book of business flowed out to the world's biggest banks to keep them solvent, and that solvency plus the elimination of the uncertainty caused by the possibility the derivative contracts would not be honored allowed governments around the world to bail out their own banks. The bailout of AIG was a masterstroke on the part of the US Treasury Department, but at the same time the fact that this disastrous book of business even existed and the lack of power of US Federal officials to take control of the ssituation was a colossal failure of regulation on the part of the US. Government.
As for Judge Wheeler, in fairness to him, I suppose the government has to meet some standard of care in its dealings with any citizen, corporate or otherwise, regardless of how egregious the conduct of that citizen, but under the circumstances it seems that AIG was dealt with more than fairly, and without any "undue harshness". In fact, Wheelers finding in this regard seems so far off as to be perverse, as if he failed to understand the situation, or as if his prejudice against government is so deep he could never find its conduct fair.
I think his decision will be considered an outlier and will have little effect on future government actions in bailout cases.
As for Judge Wheeler, in fairness to him, I suppose the government has to meet some standard of care in its dealings with any citizen, corporate or otherwise, regardless of how egregious the conduct of that citizen, but under the circumstances it seems that AIG was dealt with more than fairly, and without any "undue harshness". In fact, Wheelers finding in this regard seems so far off as to be perverse, as if he failed to understand the situation, or as if his prejudice against government is so deep he could never find its conduct fair.
I think his decision will be considered an outlier and will have little effect on future government actions in bailout cases.
1
Point of law, split decision? I'm trying to get it all together. I think it went like this:
Mr. Greenberg -
1. I'm not responsible for running over the children and old ladies, because I jumped out of the car just before it hit the victims.
2. And therefore, the government had no right to tow my car to the scrap yard, so you owe me a shiny new Caddy.
And the Judge said -
1. Your brown paper bag was appreciated.
2. But it didn't weigh quite enough
Mr. Greenberg -
1. I'm not responsible for running over the children and old ladies, because I jumped out of the car just before it hit the victims.
2. And therefore, the government had no right to tow my car to the scrap yard, so you owe me a shiny new Caddy.
And the Judge said -
1. Your brown paper bag was appreciated.
2. But it didn't weigh quite enough
2
Venue-shopping for sympathetic judges is another feature of the bizarre justice system of the US.
2
Steve
why dont you explain for us how this case was venue-shopped?
Hint: it wasn't.
why dont you explain for us how this case was venue-shopped?
Hint: it wasn't.
This has clearly been the legal situation since day one. The government viciously screwed over AIG shareholders - presumably payback of some sort - in total disregard for the law. What surprises me is a federal judge was honest enough to apply the law instead of asking Obama what he wanted done.
10
I highly recommend this comment based on it's highly ironic content. Thank you, Andrei Bilderburger.
1
In case you have forgotten, it was W's Treasury Secretary, Paulson, who decided to let AIG swing in the wind. I understand the attempt on the right to make Obama responsible for everything that has happened since taking office; I do not understand the willingness to suspend reason by holding him accountable for things done before he took office.
No bailout, no AIG is fine with me.
At the time, AIG was begging for help and had made itself ''systemically important'' by ignoring the risks it was insuring:
''a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.
One of the Wall Street chief executives participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.
Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.
Their message was simple: Lehman was expendable. But if A.I.G. unspooled, so could some of the mightiest enterprises in the world.'' http://nyti.ms/1FZGgz8
''a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.
One of the Wall Street chief executives participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.
Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.
Their message was simple: Lehman was expendable. But if A.I.G. unspooled, so could some of the mightiest enterprises in the world.'' http://nyti.ms/1FZGgz8
3
The comments so far are terribly depressing. Most suggest that the judge was guided by partisan politics. While I disagree with his decision are we confidant that it was partisan? Why must everything in America today be viewed through
a political filter? Isn't it just possible that the judge in this highly complex case
did what he thought right?
a political filter? Isn't it just possible that the judge in this highly complex case
did what he thought right?
5
Fed judges are specifically appointed by each president, and voted on by the parties in the Senate. Having appeared in front of them, yes, they are partisan. Come on.
OLD NEWS! Banks now get bailouts NOT through congress but by the Fed Reserve simply "creating out of thin air" Money and freely GIVING it to banks as they dif for QE3! They gave BANKS 1 TRILLION Dollars and asked for their trash Mortgage backed Securities, yah the Fed buying MBS's from banks, what a joke! They did all this for 2 years and no one batted an eye and no one complained, so why go through congresss again and ask for 700 Billion and hear the whole world belly ache about it and the bonuses that got paid!
A number of the comments criticize Bush for appointing this judge. Others criticize the judiciary in general starting with Gore vs. Bush. If memory serves me, Greenberg's lawyer was Mr. Boise. I thought he was part of the Liberal/Democrat group in 2000. Maybe he took the case because he didn't like what the Bush administration did in 2008. Maybe he just doesn't like Bush. Was it money? For enough money, even Sorkin might change his tune.
It's Boies I believe...
Mr Sorkin draws an utterly mistaken conclusion from this ruling. It was the overly extractive treatment in the form of claiming equity relative to the other recipients/banks. If it had merely been a loan then the ruling would probably have gone the other way. I see this as a total vindication of bailouts as an effective tool against financial contagion. This was not a ruling that ruled out future bailouts at all. If anything, it smacked down the utter chutzpah of MRG et al. who actually claimed damages when their behinds got bailed out. The Fed's action, though not perfect, mitigated the economic harm not only to AIG shareholders but also to the overall economy. I encourage everyone to take the time to read the ruling themselves and come to their own independent conclusions. Get out of the echo chamber please.
5
There seem to be a whole cadre of US judges with lacunar amnesia. We all know that the Federal Reserve Bank System is a private institution so the statement that the Fed technically can't own equity in companies seems misplaced since the Fed itself is owned by private companies.
Even more bizarre is the statement:
" We disagree with the court’s conclusion regarding the Federal Reserve’s legal authority and continue to believe that the government acted well within legal bounds. "
On it's own the statement is accurate but totally misleading. The Fed is not part of the US government and therefore technically they are free to do as they please. Please note that there is no governmental oversight of the Fed.
Mr.Greenberg of course knows this very well and is using the fact that this is not common knowledge to vent his anger and try to regain face after having so dismally failed. Apparently age does not always instill wisdom.
Even more bizarre is the statement:
" We disagree with the court’s conclusion regarding the Federal Reserve’s legal authority and continue to believe that the government acted well within legal bounds. "
On it's own the statement is accurate but totally misleading. The Fed is not part of the US government and therefore technically they are free to do as they please. Please note that there is no governmental oversight of the Fed.
Mr.Greenberg of course knows this very well and is using the fact that this is not common knowledge to vent his anger and try to regain face after having so dismally failed. Apparently age does not always instill wisdom.
5
This ruling is sort of a capitalist death wish.
Next time capitalism shoots itself in the head, al la 2008, it will somehow make one last phone call to its lawyer to get a court order for pulling the plug on its own life support system.
Can’t wait now for Yellen to raise her interest rates! Can’t wait to see what then happens to the distorted financial world created by her FED over the past 6 years.
Also, Greece’s inevitable default just got more interesting.
Get the popcorn ready for watching these “Not-too-big-to-fail” shows. (Better stock up on popcorn now. The laws of supply and demand may become null and void the next time capitalism blows its brains out; all bets may be off on popcorn futures.)
Next time capitalism shoots itself in the head, al la 2008, it will somehow make one last phone call to its lawyer to get a court order for pulling the plug on its own life support system.
Can’t wait now for Yellen to raise her interest rates! Can’t wait to see what then happens to the distorted financial world created by her FED over the past 6 years.
Also, Greece’s inevitable default just got more interesting.
Get the popcorn ready for watching these “Not-too-big-to-fail” shows. (Better stock up on popcorn now. The laws of supply and demand may become null and void the next time capitalism blows its brains out; all bets may be off on popcorn futures.)
2
This will certainly be appealed. But the big boys know now they can weasel around and buy time with certain attorneys and this business-over-people minded lawyer. Insulting ruling for the unwashed masses who bailed AIG out- You're welcome btw.
Wheeler sounds like one of W's Scotus appointees, same ideology.
This is where we're headed, folks, if we continue on the entirely corrupt path we're on. The courts, the Congress, the presidency all have a price, when profit is all that matters. Deregulate everything, dismantle gov't (the regulatory part). Only corporate matters matter. Corporations are people, my friend.
Wheeler sounds like one of W's Scotus appointees, same ideology.
This is where we're headed, folks, if we continue on the entirely corrupt path we're on. The courts, the Congress, the presidency all have a price, when profit is all that matters. Deregulate everything, dismantle gov't (the regulatory part). Only corporate matters matter. Corporations are people, my friend.
2
I agree! Saving this company from the people who ran it into the ground was "too draconian." How will we, the lowly taxpayers, ever pay them back for all the harm we've done?
8
This judge is obviously disconnected from reality. Is that a abdication of judicial temperment? Our nation is polluted with judges such as Mr Wheeler because of the reign's of W and their decisions are polluted by extremism.
5
Tom,
Two points:
One, I know the Judge in this case; he is a man above reproach. His honesty and willingness to consider all sides of a position before deciding a case is well known.
Two, if you had one tenth of the integrity of Judge Wheeler, you would not cast such ridiculous assertions about a man you've never met.
Two points:
One, I know the Judge in this case; he is a man above reproach. His honesty and willingness to consider all sides of a position before deciding a case is well known.
Two, if you had one tenth of the integrity of Judge Wheeler, you would not cast such ridiculous assertions about a man you've never met.
1
Good. And good riddance. Let the big banks all fail, already. Let the shareholders and creditors get tanked. Let the managements be fired. Let the directors get sued. And finally, either people will demand regulation, or no one will ever risk their own money on such an insane business model again - at least until a new generation of stupid comes along.
15
The directors and management are covered by insurance, paid for by the bank. The insurance could well be with AIG, which would then need another bailout
Naked credit default swaps are still allowed. What failure to learn from mistakes that is.
What is most baffling here is the fact that nobody really "won" the case- nobody will take away benefits in the short nor the long term. The ex-CEO nor the shareholders take away monetary award; and institutions in the future can only be hurt by the ruling. The government won't take the ruling and amend bailout policy- it will throw out bailout policy.
It's not like this is a win for "big business," either- in fact, they would stand to lose just as much as the public if bailouts aren't given in times of economic emergency. The business and the assets of shareholders, along with the livelihoods of thousands of employees and customers, would evaporate without the government's money.
If conditions on the bailout of AIG, which were effectively operating as collateral, are too "draconian" for the ex-CEO, its shareholders, and evidently this judge, then the same label of "draconian" should apply to consumer debt management. In that regard, this ruling emphasized the economic double standard of the institution vs. the consumer.
It's not like this is a win for "big business," either- in fact, they would stand to lose just as much as the public if bailouts aren't given in times of economic emergency. The business and the assets of shareholders, along with the livelihoods of thousands of employees and customers, would evaporate without the government's money.
If conditions on the bailout of AIG, which were effectively operating as collateral, are too "draconian" for the ex-CEO, its shareholders, and evidently this judge, then the same label of "draconian" should apply to consumer debt management. In that regard, this ruling emphasized the economic double standard of the institution vs. the consumer.
2
The government took many questionable actions during the great recession. Let's not forget the 1-week bankruptcy proceeding for GM and Chrysler - where we wiped out senior bond holders (a top creditor in bankruptcy), and preserved union health care (that is lost in most every normal bankruptcy). The government also took an equity stake in GM and Chrysler, same as AIG.
But while many of the government actions weren't within their normal authority, a true financial emergency existed, so emergency powers were in-fact the only responsible action to take. Doing nothing and letting the US economy fall into a full depression with bank runs and food lines is no more legal than the actions taken.
But while many of the government actions weren't within their normal authority, a true financial emergency existed, so emergency powers were in-fact the only responsible action to take. Doing nothing and letting the US economy fall into a full depression with bank runs and food lines is no more legal than the actions taken.
4
Why shouldn't 2008/9 Ford shareholders sue the government over the bailout of GM? If GM had gone bust Ford could be selling twice as many cars and at higher margins. The game is rigged and the bailouts are the proof. The US government broke its own system of law and order and all of those involved have gotten away with it. So far.
Just in case you can take it with you, I heard that Greenberg has a closet full of asbestos suitcases.
3
There isn't enough asbestos in the world to protect Greenberg from where he is going.
I can understand that it can be in the interest of ALL Americans to prevent some financial institutions from failing BUT to also allow CEOs to remain, keep their MULTIMILLION DOLLAR bonuses etc at the same time REPULSES me. Democrat or Republican....it makes no difference. There is a horrible bias on the part of OUR government towards big business at the expense of "WE THE PEOPLE".
12
A perplexing, self-contradictory verdict? Well, not at all if we see Judge Wheeler's place as he makes it to be. That is, of a judge in charge of a country that should bow to the owners' class. Thus of course AIG was treated unfairly, because no deference was made to it, and because the taxpayers were not even more profligate with their largesse as the government bailed out executives and investors while Main St. was left to survive on their own.
But why did Judge Wheeler did not order the government to pay billions more to those bailed out? Well, because lawmen that do the owners' bidding necessarily lack something else. And that is courage.
But why did Judge Wheeler did not order the government to pay billions more to those bailed out? Well, because lawmen that do the owners' bidding necessarily lack something else. And that is courage.
2
A transparently nonsensical ruling by a righty judge who apparently dislikes the form of the bailout but can't find fault with the substance. Greenberg should have spent two years in the can for his role in the A.I.G. fiasco.
8
I do not see if government can go to supreme court seeking precedence.
Seems like the usual "heads we win, tails you lose" rule for corporations vis-a-vis taxpayers.
Corporate welfare, rent-seeking, bailouts for high-risk investments ... and some people actually believe the growing wealth inequality is a natural outcome of good capitalism.
Corporate welfare, rent-seeking, bailouts for high-risk investments ... and some people actually believe the growing wealth inequality is a natural outcome of good capitalism.
3
So, no bail-outs next go-round? And Dodd-Frank weakened? Tell me that's not a sell signal and a buy, buy, buy for the Ag stackers and the Au bulls. That downward sliding feeling? That's global capitalism gaining momentum. Oh, and then there's Greece waiting in the wings to oil the skids.
2
Nicely said. Don't forget solar and the new Tesla home battery. Stock up on non-perishables while you can. It never hurts to be prepared; we'll need to be soon enough.
Why is this ruling a key precedent, rather than a one-off mistake by a biased or poorly reasoning judge?
4
Bob,
I'd invite you (and others who decry this ruling) to take more than a cursory glance at the actual filings and pleadings in this case. It's easy to sit on the sidelines and pass judgement without having the actual facts to consider.
Once you do review what was presented in court, perhaps then you can provide a reasoned response to what was decided by a Judge who has more integrity than many of you realize.
I'd invite you (and others who decry this ruling) to take more than a cursory glance at the actual filings and pleadings in this case. It's easy to sit on the sidelines and pass judgement without having the actual facts to consider.
Once you do review what was presented in court, perhaps then you can provide a reasoned response to what was decided by a Judge who has more integrity than many of you realize.
1
Well, I'm not sure if the judge meant to do it, but the effect of his ruling is quite positive.
1) Nothing for Mr. Greenberg, who deserves nothing. His sense of entitlement is incredible.
2) No more bailouts for big banks and companies. This is America - if a business makes bad business decisions, shouldn't they go out of business?
Sounds like exactly what the taxpayers needed out of this case.
1) Nothing for Mr. Greenberg, who deserves nothing. His sense of entitlement is incredible.
2) No more bailouts for big banks and companies. This is America - if a business makes bad business decisions, shouldn't they go out of business?
Sounds like exactly what the taxpayers needed out of this case.
10
Careful what you wish for:
Reckless company builds firetrap that catches fire near other town's other buildings. Fire Co. is prohibited from putting it out to show reckless company a lesson. Town burns down...
Wouldn't it be better to put it out, and then jail the reckless company, thus limiting its stupidity to just those at blame?
Reckless company builds firetrap that catches fire near other town's other buildings. Fire Co. is prohibited from putting it out to show reckless company a lesson. Town burns down...
Wouldn't it be better to put it out, and then jail the reckless company, thus limiting its stupidity to just those at blame?
If this ruling leads to an end of the worthless bailouts, it will be well worth it.
8
Hillary should be asked for her opinion on this extremely important decision as it affects future govt policy in a fundamental way. She's supposed to be such a brilliant lawyer (notwithstanding that she flunked the D.C. bar exam.) Let her speak, with specifics.
1
Ray,
ENOUGH already. Not everything is a cudgel for you republicans to bash Hillary with.
ENOUGH already. Not everything is a cudgel for you republicans to bash Hillary with.
1
Sure. That seems fair as long as they ask the same question during the republican presidential debate and have the moderator press the candidates for specifics as well. Let's start with Governors Walker and Perry....
1
The government's interest to keep AIG alive was _not_ driven by any concern for AIG's shareholders, but keeping other institutions alive, and using (abusing) AIG to funnel money to them. The net result was ill-gotten financial gain, not just to these institutions, but also the government and by extension, U.S. tax-payers.
In other words, AIG shareholders had the least to lose if they went bankrupt, everybody else was in it more billions more, and thanks to the government's illegal actions, weren't.
Mr. Greenberg was not asking for a condescending moral victory and by granting him one the court is sprinkling salt on his wounds. Damages are indeed due, all $40b, and maybe more for extending Mr. Greenberg's fight hoping he'll just go away. He should appeal and ask for fast-track adjudication on the grounds of age discrimination. Go Hank!
In other words, AIG shareholders had the least to lose if they went bankrupt, everybody else was in it more billions more, and thanks to the government's illegal actions, weren't.
Mr. Greenberg was not asking for a condescending moral victory and by granting him one the court is sprinkling salt on his wounds. Damages are indeed due, all $40b, and maybe more for extending Mr. Greenberg's fight hoping he'll just go away. He should appeal and ask for fast-track adjudication on the grounds of age discrimination. Go Hank!
3
Encouraging man appeal is exactly just and apt punishment for Hank. It will cost a pile and yield nothing. Perfect!
1
AIG made extravagant, unpayable promises to insure the debt of others. Stopping its failure to honor those reckless promises, for which it had been paid billions, was not "using AIG to pay others billions". Allowing it to go bankrupt would have triggered a further collapse. Your logic is demented: it would argue one can do reckless things to society and walk away in bankruptcy court leaving smoldering ruins. This judge said otherwise. Fairness says otherwise. Yours is vulture capitalism.
1
Thank you for giving us such a clear look at the Wall Street entitlement mentality!
One more piece of evidence that this Republic is devolving towards Feudalism at any cost.
Financial firms became too big to fail out of shotgun wedding purchases of failed firms by larger firms, making the larger firm even larger, and the overall number of firms fewer. In the case of banks, this was in part to avoid the need to pay out depositor insurance by the federal government.
It is folly to insure financial firms, either directly by deposit insurance, or indirectly by the availability of bailouts, and then allow the same firms to take on risks without regulation of those risks. Bernie Sanders is right. We need to apply antitrust principles and break up firms that are too big to fail. They are too big to exist. And perhaps fewer depositor accounts should be insured, and the insurance should be less per account. This would encourage depositors to diversify their financial dealings, and to do business with firms less likely to engage in risky practices.
It is folly to insure financial firms, either directly by deposit insurance, or indirectly by the availability of bailouts, and then allow the same firms to take on risks without regulation of those risks. Bernie Sanders is right. We need to apply antitrust principles and break up firms that are too big to fail. They are too big to exist. And perhaps fewer depositor accounts should be insured, and the insurance should be less per account. This would encourage depositors to diversify their financial dealings, and to do business with firms less likely to engage in risky practices.
7
A mind-bogglnigly bad decision. The only thing wrong with what the government did with AIG is that the shareholders retained any equity at all.
1
“The court bizarrely expressed repeated sympathy for A.I.G. while failing to properly weigh the economic wreckage suffered by the American people,” Mr. Kelleher said in an email. “It’s the U.S. taxpayers that have been victimized here by A.I.G. when it acted recklessly, precipitated the crash of the financial system, took a $185 billion bailout, and then gave bonuses to some of the very same people who irresponsibly sold the derivatives that blew up the company.”
I must agree with Mr Kelleher. Everything is wrong with this ruling except the fact that no money was awarded. Money and power appear to go hand in hand. We must have as our first priority the protection of the American taxpayers.
I must agree with Mr Kelleher. Everything is wrong with this ruling except the fact that no money was awarded. Money and power appear to go hand in hand. We must have as our first priority the protection of the American taxpayers.
13
Wealth always has several paths to buying the power it needs to sustain itself, even if it takes some time to accomplish its goals.
Large wealth rarely has to subscribe to "the rules" -- as long as it looks like it is subscribing to the rules it can get away with much.
6
This is confusing to me. AIG didn't have enough in its piggy bank to cover who and what they insured. So they failed. But Goldman's part in this? They got paid! Goldman is untouchable, but not the American people! Also, I think I understand this makes another bail out by the government not as likely? Yet, this judge was a Bush nominee? makes sense, as corporatists love to justify AIG and Greenberg….and another also, is that the article loves to point out the government made money on AIG? Where were the rest of the population in this, that the government was suppose to represent? The article briefly touches on this. Why didn't the people harmed by the 2008 debacle get something from the government? All of those people who lost their homes, and their jobs and whose lives were ever after suffered irreparable damage never recieved one thin dime! It seems all smoke and mirrors to me, to cover up that those that made out handsomely, still made out handsomely, and in my estimation, still will. Unless we get some populists and progressives elected, the American people will continue to be taken to the woodshed. No head scratching there….
26
I recollect that AIG paid Goldman 100% on its losses without even trying to negotiate a haircut, given the circumstances. That was some negotiation on behalf of his shareholders. I don't know what AIG paid its other insured clients.
Imagine what the shareholders like Greenberg would have received if AIG would have gone down the tubes, without government TARP intervention, as the Court just ruled. A lot of us taxpayers wouldn't have minded had that been the case.
And Maurice wouldn't have had to sue anyone. Ironically, he would have just had to defend AIG's and his own actions against his own shareholders in the bankruptcy brouhaha. Being a shareholder himself, he wouldn't have made any money either based upon the Court's ruling.
Imagine what the shareholders like Greenberg would have received if AIG would have gone down the tubes, without government TARP intervention, as the Court just ruled. A lot of us taxpayers wouldn't have minded had that been the case.
And Maurice wouldn't have had to sue anyone. Ironically, he would have just had to defend AIG's and his own actions against his own shareholders in the bankruptcy brouhaha. Being a shareholder himself, he wouldn't have made any money either based upon the Court's ruling.
25
There's a Jewish word for unmitigated gaul called "chutzpah" (I'm Jewish).
In Jewish, there's also the "story" about a boy who kills his parents.
When in the court, the boy pleads mercy for now being an orphan.
Mr.Greenberg having run the company to the point of needing huge bailout loans, certainly is in the running for a "chutzpah award",.
In Jewish, there's also the "story" about a boy who kills his parents.
When in the court, the boy pleads mercy for now being an orphan.
Mr.Greenberg having run the company to the point of needing huge bailout loans, certainly is in the running for a "chutzpah award",.
93
But his chutpah worked and it may have larger implications in future litigation. That's the thing.
2
I've heard both before (Chutzpah and Orphan) but it's the "Orphan" one hands down that applies, because of the sinister aspects involved.
For it takes some serious (unequally twisted) Gonads for these guys to take the Government to court after almost ruining the entire planet financially.
Not just ruining their company/shareholders but the entire globe:):)
For it takes some serious (unequally twisted) Gonads for these guys to take the Government to court after almost ruining the entire planet financially.
Not just ruining their company/shareholders but the entire globe:):)
He wasn't running the company at the time.
1
“The creation of the trust in an attempt to circumvent the legal restriction on holding corporate equity is a classic elevation of form over substance.”, says Judge Wheeler, as if elevating form over substance was something unusual or unfair or to be avoided. Elevating form over substance was at the heart of the legal defenses of segregation and most efforts to avoid, derail, or defang regulations. Lawyers skilled in doing this are admired, emulated, and well paid.
The substance of our tax code, for example, would be to collect money fairly and perhaps in a way that furthers other social goals. The form is an accretion of a labyrinth of rules and exceptions, cleverly riddled with loopholes, so that what goes on is concealed and it is possible to pay taxes at an unfairly low rate.
We prefer to decide issues on technicalities rather than in the light of a vision of what is fair. This enables us to avoid divisive debates over fairness and the resulting risk of learning we were wrong about something.
The substance of our tax code, for example, would be to collect money fairly and perhaps in a way that furthers other social goals. The form is an accretion of a labyrinth of rules and exceptions, cleverly riddled with loopholes, so that what goes on is concealed and it is possible to pay taxes at an unfairly low rate.
We prefer to decide issues on technicalities rather than in the light of a vision of what is fair. This enables us to avoid divisive debates over fairness and the resulting risk of learning we were wrong about something.
23
Form over substance is a legal concept, and Judge Wheeler has applied it correctly in other contexts, such as denying a corporation claimed tax deductions for a transaction that was not in substance what it purported to be in form. But I find his ruling here perplexing.
The taxpayers should have been more generous?!?
Is anyone else as sick of people like Judge Wheeler and Maurice Greenberg as I am?
What an absurd ruling, Judge Wheeler. The taxpayers were overly generous because Maurice Greenberg, and the rest of these bankers who brought us to the edge of a fiscal cliff in 2008 with unethical, criminal behavior didn't go to jail.
Is anyone else as sick of people like Judge Wheeler and Maurice Greenberg as I am?
What an absurd ruling, Judge Wheeler. The taxpayers were overly generous because Maurice Greenberg, and the rest of these bankers who brought us to the edge of a fiscal cliff in 2008 with unethical, criminal behavior didn't go to jail.
146
"The taxpayers should have been more generous?!?"
I believe that "The taxpayers should have been more generous OR not have made a deal at all" is a more accurate reading.
I believe that "The taxpayers should have been more generous OR not have made a deal at all" is a more accurate reading.
Oh he spent millions of dollars bringing this case to court? With such an obtuse ruling like that, someone should check that judge's bankroll.
58
Yes, thank you. Exactly.
If routine mandatory drug testing is required for high security jobs or jobs where peoples' safety is paramount, then routine financial disclosure for all judges ought to be required.
This is an excellent example of splitting the baby; the judge sided with the complainant, but offered no recompense. Too big to fail, but not too big to pay for the failure.
Solomonic, Mr. Greenberg. You should at least appreciate that much.
Solomonic, Mr. Greenberg. You should at least appreciate that much.
10
Another fine appointment of W Bush, Judge Thomas C Wheeler spent his career representing businesses arguing against government claims. His wacky, "inexplicable" decision reflects only his prejudice against the government. If such a weak minded decision by a single judge is a legal precedent, then the whole legal system is doomed.
A.I.G. insured nearly $60 billion in fraudulently rated sub prime securities without assets or reinsurance to back it up. The government was forced to bail out A.I.G. to pay the claims to prevent further systemic failures at a critical moment. Greenburg is the kind of deranged executive emblematic of the great fraud of the asleep-at-the-switch Bush years that collapsed the economy and ruined millions of lives. Even after the bailout, A.I.G. executives were granted $165 million in bonuses.
Heckuva job, Brownie, uh, I mean Greenie.
A.I.G. insured nearly $60 billion in fraudulently rated sub prime securities without assets or reinsurance to back it up. The government was forced to bail out A.I.G. to pay the claims to prevent further systemic failures at a critical moment. Greenburg is the kind of deranged executive emblematic of the great fraud of the asleep-at-the-switch Bush years that collapsed the economy and ruined millions of lives. Even after the bailout, A.I.G. executives were granted $165 million in bonuses.
Heckuva job, Brownie, uh, I mean Greenie.
321
so blame Fitch who told the whole world that those horrible sub prime securities that they knew, they KNEW were total garbage they rated AAA. They did that and by being PAID OFF and never even got a little as a slap on the wrist! You cant blame AIG, they thought this trash was AAA stuff!
2
GmanIV, we do blame the ratings agencies. Yet nothing was done. Match the irony of downgrading the US while propping up the ridiculous fantasies of Wall Street.
If it ever really comes down to it, WS v. Main St., Main Street is armed to the teeth and will clean their clocks before hanging them from lamp posts.
Why, oh, why do elites never realize how precarious their position on that mountaintop is until we forcibly knows them down?
Used to be we had a concept in this country called "enlightened self-interest. It was the knowledge that systems based on serfdom are as weak as a house of cards and can tumble down quote easily?
Instead of showing gratitude to the government and the people it represents, these elites take our money and complain about a 12% interest rate? I confess my rate of interest on credit cards is lower than that, but that is because I an solvent and pay my bills. AIG was insolvent. They were lucky to get anything. Just ask the poor people depending on payday loans to get by.
If it ever really comes down to it, WS v. Main St., Main Street is armed to the teeth and will clean their clocks before hanging them from lamp posts.
Why, oh, why do elites never realize how precarious their position on that mountaintop is until we forcibly knows them down?
Used to be we had a concept in this country called "enlightened self-interest. It was the knowledge that systems based on serfdom are as weak as a house of cards and can tumble down quote easily?
Instead of showing gratitude to the government and the people it represents, these elites take our money and complain about a 12% interest rate? I confess my rate of interest on credit cards is lower than that, but that is because I an solvent and pay my bills. AIG was insolvent. They were lucky to get anything. Just ask the poor people depending on payday loans to get by.
1
Steve Jobs has taken liberties (once again) with my choice of language. Knows is knock, quote is quite.
I forgive everyone on these comment pages unilaterally for all typos and mysterious language. The ghost of Steve Jobs is haunting us all.
I forgive everyone on these comment pages unilaterally for all typos and mysterious language. The ghost of Steve Jobs is haunting us all.
If the Government were to re-enact the Bank Holding Company Act and enforce the antitrust laws to prevent over concentration in particular industries then, perhaps, systemic failures could be avoided. It is anti-capitalism for profit making businesses to seek public money to provide a soft-landings due to bad decision making. Being a capitalist means taking risk and being subject to loss and failure on one side and benefit and profit on the other. U.S. Corporations have managed to privatize profits, obtain public subsidies (Walmart, for example, has a heavily subsidized work-force; Exxon-Mobil a tax-payer funded subsidy) and to have the tax payer act as insurer of last resort. Perhaps the lack of the promise of a soft-landing will revive long absent prudence in making business decisions and taking business risks by making risk real.
44
Golly, so we might have to break up the biggies after all! Downright un-American, right?
6
The government has no right to interfere with the wishes and actions of the 1%.
62
I would hope that we will now will require larger reserves.
15
The US Govt should have never let the bankers get away to begin with we should have prosecuted and arrested each one of them. I am ashamed we did not like the people did in Iceland we should have done it here.
38
The politicians are being bankrolled by the banksters is why.
Don't bite the hand that feeds you.
Don't bite the hand that feeds you.
1
The idiocy of this 'judge' boggles the mind.
36
Not idiocy - perfectly understandable loyalty - to those who put him on the bench and paid him before he got there.
"Legal experts say that the ruling, coupled with certain provisions of the Dodd-Frank financial overhaul law enacted after the crisis, makes it unlikely the government would ever rescue a failing institution, even if an intervention was warranted."
So the govt will be faced with a 2008 crash, mega banks whose corruption will cascade into an economic collapse - and it will be worried that a judge will find it's bailout deal too draconian, and it will do nothing...
Ridiculous. It will do any bleeping thing it has to, to avoid that catastrophe - exactly as it did in 2008. And the banks know it.
Most Americans understand it's wrong & dangerous to allow them to exist in too-big-to-fail form. Only DC'ers want to pretend they can finesse that. Because who, will fund their re-elections otherwise...
So the govt will be faced with a 2008 crash, mega banks whose corruption will cascade into an economic collapse - and it will be worried that a judge will find it's bailout deal too draconian, and it will do nothing...
Ridiculous. It will do any bleeping thing it has to, to avoid that catastrophe - exactly as it did in 2008. And the banks know it.
Most Americans understand it's wrong & dangerous to allow them to exist in too-big-to-fail form. Only DC'ers want to pretend they can finesse that. Because who, will fund their re-elections otherwise...
36
"It will do any bleeping thing it has to, to avoid that catastrophe - exactly as it did in 2008. And the banks know it."
I think it's more accurate to say that the government will do any bleeping thing it *wants* to do.
I think it's more accurate to say that the government will do any bleeping thing it *wants* to do.
Congress must strengthen provisions that ensure that "Too Big to Fail" institutions are broken up. Then, they must provide the capital necessary to enforce regulations already on the books to keep greed from destroying our economy. We know how painful that has been, and continues to be for many who lost their life savings, won't retire any time soon, lost their businesses when loans were hard to come by for deserving small businesses, etc.
Of course, this assumes we can get the influence of money out of government.
Go Bernie!!!
Of course, this assumes we can get the influence of money out of government.
Go Bernie!!!
28
If 12% interest is too "draconian," then how can banks and credit card companies charge 20%, 30%, or more on credit card debts?
171
Because credit card debts are not secured by any assets. That was not the case in the matter of AIG.
But, Title loan companies charge over 500% interest to poor people. Those are secured by "assets" Any Hain.
The poor are dealt a different hand than the rich. It's time to start using the same Payday Loan and Title Loan documents on rich people when they need to be bailed out.
The poor are dealt a different hand than the rich. It's time to start using the same Payday Loan and Title Loan documents on rich people when they need to be bailed out.
32
Thanks, Andy, for a rare note of common sense here among the pitchforks crowd.
Big surprise: Judge Thomas Wheeler is a George W. Bush appointee.
I suppose that Wheeler would also have ruled George H. W. Bush's handling of the S&L crisis too harsh.
Why hold liars and thieves to account if they're worth billions? Wheeler joins a growing list of judges who hold that punishing the wealthy is just too unkind -- too distressing for spoonfed oligarchs (but fine for us proles).
I do look forward to the interest rates on my credit cards being ruled illegal because they're "unduly harsh."
I suppose that Wheeler would also have ruled George H. W. Bush's handling of the S&L crisis too harsh.
Why hold liars and thieves to account if they're worth billions? Wheeler joins a growing list of judges who hold that punishing the wealthy is just too unkind -- too distressing for spoonfed oligarchs (but fine for us proles).
I do look forward to the interest rates on my credit cards being ruled illegal because they're "unduly harsh."
47
Now the risky financial people who took on excessive risk thinking they would be bailed out are now on their own. Faced with the biggest risk of complete failure, the financial industry will be forced to collude and reach an understanding that they can no longer take inventive risks.
With the risk of complete failure looming over the industry, they have no choice but to reign in financial excesses that endanger them.
Bluntly; if you fail, the shareholders lose as well as the customers and the American public, then watch your back during the ensuing revolt. That's real life big guys, it would happen.
With the risk of complete failure looming over the industry, they have no choice but to reign in financial excesses that endanger them.
Bluntly; if you fail, the shareholders lose as well as the customers and the American public, then watch your back during the ensuing revolt. That's real life big guys, it would happen.
8
"Legal experts say that the ruling, coupled with certain provisions of the Dodd-Frank financial overhaul law enacted after the crisis, makes it unlikely the government would ever rescue a failing institution, even if an intervention was warranted.... Should that happen, and the government decides it is handcuffed by the law from any intervention, taxpayers can thank Maurice Greenberg, the company’s former chief executive and one of its largest shareholders..."
Thanks Maurice for putting the welfare of this country at risk because of your greed.
Thanks Maurice for putting the welfare of this country at risk because of your greed.
24
Our corporate management establishment thinks greed is virtue, they seriously do. They have business schools that teach this gospel, and holy scripture it is to them:
"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."
If you think this is not their religion you are out of touch. It's not where you go to show your face a couple of times a year and who officiates at your weddings; it's the creed you live by, that defines your every day reality. Mammon is their god.
"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."
If you think this is not their religion you are out of touch. It's not where you go to show your face a couple of times a year and who officiates at your weddings; it's the creed you live by, that defines your every day reality. Mammon is their god.
1
Very talented lawyers file and prosecute a case scoring points left and right that make the government appear to be slipshod, or even foolish. The Court gets caught in an avalanche of evidence and good arguments. The media's attention gives the case a sense of gravitas that it does not have. But the NUMBER ONE QUESTION at the beginning of any case is whether the litigant has sustained damages, or injury. There was none here--that's why the government did what it did. The stock was worthless without the government's (taxpayer's) help.
Greenberg is no champion of shareholder rights. He champions only himself. He was responsible for the problem and I hope his lawyers charged him a ton of money. If they are smart they got their money up front.
Greenberg is no champion of shareholder rights. He champions only himself. He was responsible for the problem and I hope his lawyers charged him a ton of money. If they are smart they got their money up front.
88
Greenberg is about as greedy as they come. The original Scrooge. I hope his remaining years are spent wallowing in bitterness over the billions the Government 'stole' from him after his former company ruined the lives of so many.
42
MartinC
Perhaps we should let Mr. Greenberg wallow in his millions, while we focus attention on ourselves and the casualties who did truck with his company. It is another reminder that nothing material in life is fool-hardy or fool-proof, and for those of us with lesser means, let us learn not to place all our pennies in one basket. The Stock Market has always made me nervous and it is getting harder to safe-guard what we have in the till.
The other day a man, a hard worker, who is struggling to make a living and protect his two young grown daughters, also wage earners, from the dole, brought up his worry about the future. He is tired, if not bitter and as cold comfort, I offered the concept that a man in possession of $3000 sleeps less well than on $3 daily.
Moving along, it is going to take net-working among those we care about to learn to 'share', and should I hear again that 'Life is not Fair', the messenger of this latter platitude is going to get clocked.
In the meantime, my ears are still ringing from hearing 'The Banker is not your Friend!' and the blame was mine. Let us try to go forward, and not backwards, or some of us will have reason to shed tears.
Perhaps we should let Mr. Greenberg wallow in his millions, while we focus attention on ourselves and the casualties who did truck with his company. It is another reminder that nothing material in life is fool-hardy or fool-proof, and for those of us with lesser means, let us learn not to place all our pennies in one basket. The Stock Market has always made me nervous and it is getting harder to safe-guard what we have in the till.
The other day a man, a hard worker, who is struggling to make a living and protect his two young grown daughters, also wage earners, from the dole, brought up his worry about the future. He is tired, if not bitter and as cold comfort, I offered the concept that a man in possession of $3000 sleeps less well than on $3 daily.
Moving along, it is going to take net-working among those we care about to learn to 'share', and should I hear again that 'Life is not Fair', the messenger of this latter platitude is going to get clocked.
In the meantime, my ears are still ringing from hearing 'The Banker is not your Friend!' and the blame was mine. Let us try to go forward, and not backwards, or some of us will have reason to shed tears.
This judge is crazy enough to get on the Supreme Court! Maybe he was just auditioning.
38
Unfortunately, the judiciary of the United States fully reflects the results of Republican presidencies. From the Bush v. Gore decision, in which the "federalists' chose to overrule a state's Constitutional right to set its election laws, to Citizens United, which declared corporations "persons" with apparently the same rights as real people, the Republican appointees have continuously supported the claims of the American oligarchs. How sad.
"Hank" Greenberg unfortunately has hit another home run, and the American people are the ultimate losers.
"Hank" Greenberg unfortunately has hit another home run, and the American people are the ultimate losers.
55
So forgive me for thinking like a (now-retired) lawyer:
It was perfectly clear (to everyone, I think) that the AIG stockholders would have received not a penny if the taxpayers had not bailed out AIG. That seems pretty undisputed, common ground.
Thinking in terms of the routine lawyerly questions of (1) is there liability, and (2) if there is liability, then what damages were caused by the unlawful conduct?
So because it was clear that AIG stockholders would have received nothing whatever without a taxpayer bailout, it was therefore clear that whatever the judge’s ruling on liability, there could be no damages to plaintiffs.
So why, with this opinion, did Judge Wheeler yammer on and on with his apparent view that the government acted badly, when that discussion was of no actual consequence?
Judge Wheeler is an Article I judge. One can wonder if an Article III judge, subject to Article III of the Constitution’s restriction of judicial power to actual “cases or controversies”, would have refrained from going on about his view of -- would have felt it appropriate to second-guess -- the government’s attempt to resolve the greatest financial crisis since the 1930’s.
It was perfectly clear (to everyone, I think) that the AIG stockholders would have received not a penny if the taxpayers had not bailed out AIG. That seems pretty undisputed, common ground.
Thinking in terms of the routine lawyerly questions of (1) is there liability, and (2) if there is liability, then what damages were caused by the unlawful conduct?
So because it was clear that AIG stockholders would have received nothing whatever without a taxpayer bailout, it was therefore clear that whatever the judge’s ruling on liability, there could be no damages to plaintiffs.
So why, with this opinion, did Judge Wheeler yammer on and on with his apparent view that the government acted badly, when that discussion was of no actual consequence?
Judge Wheeler is an Article I judge. One can wonder if an Article III judge, subject to Article III of the Constitution’s restriction of judicial power to actual “cases or controversies”, would have refrained from going on about his view of -- would have felt it appropriate to second-guess -- the government’s attempt to resolve the greatest financial crisis since the 1930’s.
237
I see logic in the decision.
Was the government approach to AIG aggressive? I think possibly yes. If you make yourself the "option of last resort" and are representing the benefit of the people, you should not optimize for purely economic return.
Would AIG have been worthless if the government not interceded? Likely, but theoretical until it actually dissolved. There is never an actual option of last resort. Only the first buyer or insolvency.
More "economic wreckage suffered by the American people" was why the government interceded. Should some of the value delivered to the American people flow back to the shareholders? The government has responsibilities to all parties in this role.
And I find the argument that the government had more power with AIG than it did with the banks because the government did not have regulatory power over AIG highly ironic! It speaks to the flaws in bank regulation.
Was the government approach to AIG aggressive? I think possibly yes. If you make yourself the "option of last resort" and are representing the benefit of the people, you should not optimize for purely economic return.
Would AIG have been worthless if the government not interceded? Likely, but theoretical until it actually dissolved. There is never an actual option of last resort. Only the first buyer or insolvency.
More "economic wreckage suffered by the American people" was why the government interceded. Should some of the value delivered to the American people flow back to the shareholders? The government has responsibilities to all parties in this role.
And I find the argument that the government had more power with AIG than it did with the banks because the government did not have regulatory power over AIG highly ironic! It speaks to the flaws in bank regulation.
There are even U.S. Supreme Court justices (using the term only as a title, NOT as a descriptor of their work product) who feel no compulsion to restrict the content of their decisions to the facts and questions of law that arise in actual cases or controversies. Ironically, the self-same jurists claim to strictly adhere to the original intent of the Constitution, at least when their positions are supportable using that method. Nonetheless, when federal court judicial appontments (prestigious life-time appointments) are doled out to political cronies regardless of whether those put forward are actually intellectually qualified, there will be judges who think the bench is their soapbox from which to proclaim their vision of utopa. Thank goodness this pontificating is just dicta.
As another (semi-retired) lawyer, I agree completely. It is a case in which a judge decided to try to show how smart he is without considering or maybe even understanding the consequences. And Mr. Boies was apparently happy to take millions of dollars in legal fees from Mr. Greenberg for representing him and trying what he surely knew was a losing case. It will now be up to some other court to try to undo the damage, entailing more millions of dollars in legal fees, much of which will be borne by the taxpayers.
The logic of the ruling is incomprehensible, but the effect is simple: no more bailouts.
"Too big to fail" now becomes a crisis issue, and the problem will be all the downstream counter-parties when the nex AIG fails. How many otherwise-solvent companies will a big failure bring down?
"Too big to fail" now becomes a crisis issue, and the problem will be all the downstream counter-parties when the nex AIG fails. How many otherwise-solvent companies will a big failure bring down?
66
The fact that something is incomprehensible to you does not make it incomprehensible.
What makes anyone think this judge's decision will prevail the next time there is a financial meltdown? Highly unlikely IMHO.
Now, after we the taxpayer paid trillions of dollars to save "to big to fail"; it was illegal. And throw in all the lost houses, lost 401ks, the jobless recovery, the squandered stimulus, etc. We can thank Democrats, Republicans, Bill Clinton, George W. Bush and Barack Obama fo all having their hands in the mess.
Why Bill Clinton? For gutting Glass-Steagal which set into motion events that led to AIG's failure, bailouts and "too big to fail". The GOP and Democrats for agreeing to deregulations, and deregulating more. To Wall Street which bet on mortgage failures and lenders who leant money to people who had no business getting a home loan.
And through all of this, few ended up fined, let alone in jail. And why fines, that were levied, were so minimal it was treated as a "cost of doing business".
So, this article is like being hit by a flood, after being hit by a hail storm and tornado. Ugly, uglier and ugliest.
Finally, the crooks, the politicians, the regulators, et. al. get off. And issue a huge, empty "I'm sorry" for wrecking the lives of millions, in the US, and millions more around the world.
Too bad there is not justice for lost jobs, lost savings, lost houses, lost livelihoods, lost families and lost lives.
Meanwhile, Wall Street, et. al. are already working on the next economic disaster and praying to be bailed out. Let's hope this article rings true, that the enxt time; they do fail. Poetic justice.
Why Bill Clinton? For gutting Glass-Steagal which set into motion events that led to AIG's failure, bailouts and "too big to fail". The GOP and Democrats for agreeing to deregulations, and deregulating more. To Wall Street which bet on mortgage failures and lenders who leant money to people who had no business getting a home loan.
And through all of this, few ended up fined, let alone in jail. And why fines, that were levied, were so minimal it was treated as a "cost of doing business".
So, this article is like being hit by a flood, after being hit by a hail storm and tornado. Ugly, uglier and ugliest.
Finally, the crooks, the politicians, the regulators, et. al. get off. And issue a huge, empty "I'm sorry" for wrecking the lives of millions, in the US, and millions more around the world.
Too bad there is not justice for lost jobs, lost savings, lost houses, lost livelihoods, lost families and lost lives.
Meanwhile, Wall Street, et. al. are already working on the next economic disaster and praying to be bailed out. Let's hope this article rings true, that the enxt time; they do fail. Poetic justice.
42
They are laughing all the way to the bank, so to speak.
1
Judge wheeler declares
This Crook is right, Me , the tax payer who foot the bill ( 180 Billion USD) is wrong.
How fair treatment 7 years after the great recession, pillaged our life.
This Crook is right, Me , the tax payer who foot the bill ( 180 Billion USD) is wrong.
How fair treatment 7 years after the great recession, pillaged our life.
8
This is a victory for the American public after the dust settles from the fight between Greenberg and the government. If this truly negates any future bailouts, then all large financial institutions are on notice that any risky behavior will result in their assured failure and demise. I would say that is a good incentive to do the right thing and run a proper business. The American people won this fight in many ways. The bankers and their lawyers are not stupid people. They will behave.
5
I don't think you quite understand reality. Institutions, despite what the Supreme Court says, are not people. But people make decisions at institutions. There WILL come a day when the financial system faces a crisis like 2008 and the prudent action will be a government lifeline (bailout if you must) in order to prevent systemic dysfunction in the economy. Absolutely no one will win when when the aid does not arrive and that creates a financial depression. We were lucky this time. The U.S Government saved us all a world of pain. This ruling is unfortunate and ripe for appeal. But at least Greenberg got all the money he deserved. None.
17
I'd like to think you're right, but I don't think that will happen. Because they're not stupid, if the CEO and top mgmt. can personally get lots of money for taking too many risks even if the company goes out of business, they could care less. The last 15 years have taught me that many (not all) of the rich and powerful, especially those from Wall Street, don't care about anyone else, let alone their employer.
14
"We were lucky this time. The U.S Government saved us all a world of pain."
The global banks and corporations of the world thank you for your comment.
The global banks and corporations of the world thank you for your comment.
The best lawyers that Greenberg's money could buy... And the best 'justice,' judge, etc... Plutocracy triumphs again in the USA...
Once the plutocrats, Wall Street types, and judges like this guy finish, the carcass of the USA will be picked clean.
The question is what do they think will be left to buy with all their ill-gotten money, once the nation is in a complete shambles, along with the legal and political system, the infrastructure crumbles totally, the government-sources water runs out, etc?
That's assuming there's no revolution the little people, a la France 1789 or Russia 1919, about all the "austerity" and 1%-dictated hardships...
...
Once the plutocrats, Wall Street types, and judges like this guy finish, the carcass of the USA will be picked clean.
The question is what do they think will be left to buy with all their ill-gotten money, once the nation is in a complete shambles, along with the legal and political system, the infrastructure crumbles totally, the government-sources water runs out, etc?
That's assuming there's no revolution the little people, a la France 1789 or Russia 1919, about all the "austerity" and 1%-dictated hardships...
...
18
A scorpion and a frog meet on the bank of a stream and the scorpion asks the frog to carry him across on its back. The frog asks, “How do I know you won’t sting me?” The scorpion says, “Because if I do, I will die too.”
The frog is satisfied, and they set out, but in midstream, the scorpion stings the frog. The frog feels the onset of paralysis and starts to sink, knowing they both will drown, but has just enough time to gasp “Why?”
Replies the scorpion: “It’s my nature…”
The frog is satisfied, and they set out, but in midstream, the scorpion stings the frog. The frog feels the onset of paralysis and starts to sink, knowing they both will drown, but has just enough time to gasp “Why?”
Replies the scorpion: “It’s my nature…”
1
Mad Men done. Jon Stewart, a new project after your show. Mad, The real mad insanely greedy Men. Real names but no, you gotta use actors, look what happened to Spacey's Netflix political thing.
Then a little series on something that is not a part of this government running the finances for the nation and much of the world. Little life stories about what families they were from, how many millions made for themselves. The clubs they played in. The estates, Hunt Clubs, the things the middle class reads about. What did Rothschilds say?
Then a little series on something that is not a part of this government running the finances for the nation and much of the world. Little life stories about what families they were from, how many millions made for themselves. The clubs they played in. The estates, Hunt Clubs, the things the middle class reads about. What did Rothschilds say?
3
Perhaps you can color me "naive" here--but as I read the judge's decision here, his beef with the terms of the deal that AIG--is solely in terms of how it compared with the bailouts the Goldman Sachs set got.
AIG was shut down.
Goldman Sachs got to keep on trundling forward--nickling and diming the world to ever greater profit.
As I see it--the judge concluded that AIG was treated more harshly that their co-conspirators.
The fact that he also found they were owed nothing in recompense suggests his view is that their fellow travelers should have met AIG's punishment
AIG was shut down.
Goldman Sachs got to keep on trundling forward--nickling and diming the world to ever greater profit.
As I see it--the judge concluded that AIG was treated more harshly that their co-conspirators.
The fact that he also found they were owed nothing in recompense suggests his view is that their fellow travelers should have met AIG's punishment
8
Wall Street, too big to fail too important to go to jail.
What these guys do not get is the entire US economy collapsed. Everyone of us had a net worth of zero.
The workers should have refused to go to back to work after the economy collapsed until they were given the same deal that the Wall Street tycoons got.
What these guys do not get is the entire US economy collapsed. Everyone of us had a net worth of zero.
The workers should have refused to go to back to work after the economy collapsed until they were given the same deal that the Wall Street tycoons got.
133
George
'Fat chance', as the saying goes and some of these big guys did go to jail. While this may have offered solace to some, it is those who never worked again as a result of the above who are out on a limb. It is still incomprehensible to this American that we had a Government Shut-Down not so long ago, when some of us were brushing the dust off our knees, watching the demise of the American Dream.
'Fat chance', as the saying goes and some of these big guys did go to jail. While this may have offered solace to some, it is those who never worked again as a result of the above who are out on a limb. It is still incomprehensible to this American that we had a Government Shut-Down not so long ago, when some of us were brushing the dust off our knees, watching the demise of the American Dream.
That is a great idea to have workers hold out until we got the same deal that Wall Street did. The problem is that with the U.S.A.P.A.T.R.I.O.T. act any interruption of commerce is labeled a "terrorist act".
We could fight, but we'd all be jailed. This is the America we have now. It's so sad to see Americans cheer for losing their rights. Land of the Free, home of the Brave? More like "Land of the 1 paycheck from homelessness, Home of those in constant fear".
We could fight, but we'd all be jailed. This is the America we have now. It's so sad to see Americans cheer for losing their rights. Land of the Free, home of the Brave? More like "Land of the 1 paycheck from homelessness, Home of those in constant fear".
What needs to be emphasized is the unique status of this bailout as a means by which Fed officials, all former bankers, rerouted bailout funds to the investment banks to which AIG owed money. The AIG bailout was designed to allow former Goldman employees to compensate Goldman for the funds it was owed by AIG.
24
This is a point I'd been aware of but forgot about. Why does the government not sue AIG's creditors who got the AIG bailout indirectly? If I transact with a business that goes bankrupt, that's my loss. The fact that the Court ruling acknowledged that absent the bailout AIG's worth would have been $0 means that Goldman Sacks et al who were paid with money from the AIG bailout simply had the status of unlucky investors, had simply lost their gamble. I'm not sure but the government I believe did get reimbursed by Goldman Sachs and maybe other banks as well, but I doubt they have paid the equivalent of all the retroactive insurance premiums they'd have to have paid for the government to act as their personal gambling underwriter, which is how they used the taxpayer.
Oh wait. George W. Bush appointed him. I am shocked.
23
And Clinton repealed Glass-Steagall which was a whole lot worse.
Who appointed Wheeler?
4
I find it somewhat ironic that the judge feels sorry for AIG being offered a 12% loan when they faced financial collapse through their own folly and credit card companies can charge consumer as much as 32% and that is considered covering risk and good business.
Aaah the rich, they are not like you and I...
Aaah the rich, they are not like you and I...
104
It's not irony. It's called lying.
1
To get monetary compensation, what Hank Greenberg should have asked is, "why, if the US government was effectively backstopping all AIG obligations, there was any need to pay investment banks billions of dollars related to derivative contracts obligations that AIG guaranteed?" (i.e., if investment banks had their AIG counterparty risk replaced by US government counterparty risk, an immensely higher quality and better option, what earthly reason did investment banks have to claim they were owed billions under "contractual obligations" related to changes in AIG or corporate ratings or other benchmarks?).
The fact that US government affiliated entities permitted this cash transfer of billions of dollars from US taxpayers (who were backstopping AIG obligations) to investment banks, is the truly "criminal" component of the AIG story. The publicized rationalization at the time, of maintaing the "sanctity of contracts," was absurdly misplaced and incorrect.
Except for the preceding, the rationale that otherwise AIG stockholders would have had "a 100% of nothing," is exactly correct.
The fact that US government affiliated entities permitted this cash transfer of billions of dollars from US taxpayers (who were backstopping AIG obligations) to investment banks, is the truly "criminal" component of the AIG story. The publicized rationalization at the time, of maintaing the "sanctity of contracts," was absurdly misplaced and incorrect.
Except for the preceding, the rationale that otherwise AIG stockholders would have had "a 100% of nothing," is exactly correct.
20
Save the American economy is already too late, it need to fully rebuild. Crises of different years, showed all the weaknesses of the American economy, and we must use them to ensure a decent future for our children!
5
AIG accepted the loan terms in the free market economy they lobbied for. This was of their own free will; coercion, if it existed, was nothing these masters of the universe couldn't handle.
All Greenberg has done here is make the next crash worse.
All Greenberg has done here is make the next crash worse.
15
Sorkin stop wasting your time working at CNBC. You have more talent that that position merits. What is really at fault is the judge who made this decision. Why in the world would taxpayers have the responsibility to pay more to a firm that would have filed for bankruptcy without the Fed bailing them out. Short term memory problems are to blame or it is worse then that. Are they golfing buddies or future golfing buddies? If ever there was a decision that proves how important it is to elect the Democrats to the White house for future Supreme Court appointments then this is a real example of the necessity to never to vote for the Republicans. Only a one sided view without real logic would of made this decision. Truly a decisions filled with idiocy. This clearly shows how important it is to fight judicial decisions, for this one lacks merit, and for years will e studied in both colleges and law schools as students will laugh at the stupidity of Judge Wheeler.
16
You mean another Democrat like Bill Clinton who, as I mentioned earlier, repealed Glass-Steagall?
I would suggest that this was far worse than appointing a stupid judge.
I would suggest that this was far worse than appointing a stupid judge.
JH: You've repeatedly said that Clinton repealed Glass-Steagall. How, exactly, does a President go about repealing legislation enacted by Congress?
The U.S. has the best judges money can buy.
122
Judge Wheeler feels deeply for poor AIG, forced to accept a 12% loan as a result of business conduct that brought global markets, businesses and millions of homeowners to their knees.
I wonder what market rates would have been available for a $185 billion unsecured loan to a bankrupt company in the midst of a financial panic brought on by the company's own doing?
There were no market rates at any price. None.
Hank Greenberg saved hundreds of millions of dollars personally because the government and the US taxpayers provided an unlimited amount of capital to this unregulated entity that caused such havoc.
And for that he showed his thanks by suing the US taxpayer.
Greenberg was a big supporter of Mitt Romney for president.
Mitt Romney stigmatized most government safety net spending – from Medicare to food stamps to unemployment compensation to free school lunches.
But Romney never pointed a finger at his entitled rich donors who received hundreds of billions in government largesse through bailouts, government contracts, subsidies, preferential tax treatment, etc.
Maybe that is why he lost.
I wonder what market rates would have been available for a $185 billion unsecured loan to a bankrupt company in the midst of a financial panic brought on by the company's own doing?
There were no market rates at any price. None.
Hank Greenberg saved hundreds of millions of dollars personally because the government and the US taxpayers provided an unlimited amount of capital to this unregulated entity that caused such havoc.
And for that he showed his thanks by suing the US taxpayer.
Greenberg was a big supporter of Mitt Romney for president.
Mitt Romney stigmatized most government safety net spending – from Medicare to food stamps to unemployment compensation to free school lunches.
But Romney never pointed a finger at his entitled rich donors who received hundreds of billions in government largesse through bailouts, government contracts, subsidies, preferential tax treatment, etc.
Maybe that is why he lost.
383
Perfect. Absolutely perfect.
3
Perfectly said. Thanks for an outstanding post.
3
Nah, it was the stupidity of getting caught making that 47% remark.
1
"End all bailouts" until they change the law again (again).
2
Once financial institutions are allowed to grow "to big to fail," that means that if they fail, we all go down the toilet with them. The judge in this case doesn't seem to understand that.
177
Maybe, just maybe, this will spur congress to act. We need serious reform of our financial markets (and corporate structures) and this ruling may create a large enough point of vulnerability that even those lazy louts in DC get off their rears and do something about it.
This is a bad decision. A I G was a large part of the economic meltdown. This will be appealed.
This is a loss for American taxpayers, and it is due to Judge Wheeler, who appears to have misunderstood the regulatory complexities of the case. What a shame he felt the need to undue the original settlement and its terms. At least, Mr. Greenberg received no monetary compensation. But the economic implications of this case will reverberate from building to tall building along Wall Street.
Big money clients everywhere are emboldened to reopen their Great Recession settlements, saying to their underlings, get me that Wheeler judge and get me David Boies as our attorney. Sometimes justice isn't served even after it makes another attempt at doing so. Too bad for us.
124
I agree, and I'm particularly offended that Hank Greenberg would bring such a suit, essentially spitting in the faces of his rescuers, us. He probably should have been investigated and indicted. BUT, if this puts an end to bailouts, that's fine with me. Let the too big go ahead and fail, or mind their pints and quarts. More Wall St. shenanigans.
He made the correct ruling. The terms of AIG's bailout were much, much worse than the other financial institutions in the same position. They also gutted a lot of AIGs best assets as 'we' became major shareholders - not sure that made sense.
2
The logical conclusion is NOT that AIG's bailout should have been more generous. The conclusion is that all of the other bailouts should have been more severe.
38
The government was unduly harsh on AIG? Perhaps the government can now go back and dole out the same harsh treatment to all the other banks. Claw backs of bonuses; foreclosures lining the streets of the Hamptons and Greenwich; piles of possessions at the curb in those town from evictions; empty bank towers in NY - I think this is something liberals and Tea Partiers could both applaud.
66
The actions taken against AIG were taken against Maurice Greenberg personally. Government stole his company from him, heaped immense burdens on it and, when it came back despite all these efforts, cashed in on what had been expropriated while denying anything to those who had built the company from scratch. If the feds had merely lent AIG capital, even at exorbitant terms, it would have paid them back with the same interest they received from the expropriation -- but its equity wouldn't have been stolen. Some "bailout".
AIG was never "bankrupt" in the sense that it lacked cash for ongoing operations. It temporarily lacked the ability to cover anticipated shortfalls due to credit default swaps, because regulators insisted on a rule of "mark to market" that assumed that an asset whose value temporarily couldn't be calculated must be assumed valueless. AIG's clients were forced to regard those assets as worthless when in fact they had substantial tangible value, yet called on AIG to pay the full insured penalty. They made out like bandits as government insisted on a full payout by AIG, then recovered the value of the assets when it BECAME calculable.
Greenberg already had been ousted as CEO of AIG but now had the company he'd built stolen. The values of AIG management, before and after his ouster, left a lot to be desired, but we now have a government that will punish that by stealing what it wishes.
The recent decision didn't go far ENOUGH in condemning that government.
AIG was never "bankrupt" in the sense that it lacked cash for ongoing operations. It temporarily lacked the ability to cover anticipated shortfalls due to credit default swaps, because regulators insisted on a rule of "mark to market" that assumed that an asset whose value temporarily couldn't be calculated must be assumed valueless. AIG's clients were forced to regard those assets as worthless when in fact they had substantial tangible value, yet called on AIG to pay the full insured penalty. They made out like bandits as government insisted on a full payout by AIG, then recovered the value of the assets when it BECAME calculable.
Greenberg already had been ousted as CEO of AIG but now had the company he'd built stolen. The values of AIG management, before and after his ouster, left a lot to be desired, but we now have a government that will punish that by stealing what it wishes.
The recent decision didn't go far ENOUGH in condemning that government.
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Well, if AIG didn't like the terms of the loan, they could have gone else where. Oh wait, there wasn't anywhere else to go because all the banks were collapsing. My response to your argument is TFB.
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AIG acted incredibly irresponsibly leading up to the crash. Greenberg and AIG got better treatment than they deserved. Had the government not stepped in, there would no longer be an AIG.
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I hope you're being sarcastic. AIG did not have the liquidity it needed to pay the CDS that were coming due, and as such it would have been totally liquidated and as the judge stated, shareholders would have been wiped out entirely.
You don't like "mark to market?" what's better, "mark to myth?" to let individuals set the prices of the assets they hold to which ever value suites them best, what about the power of the market and efficient market theory? Without mark to market shareholders have no idea of the value of the underlying asset, the risk is obscured by masking liabilities
You don't like "mark to market?" what's better, "mark to myth?" to let individuals set the prices of the assets they hold to which ever value suites them best, what about the power of the market and efficient market theory? Without mark to market shareholders have no idea of the value of the underlying asset, the risk is obscured by masking liabilities
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No more bailouts.
My suspicion: bailouts galore. Why? What this judge has done is to declare that the government, i.e. the taxapayer, can come save you and throw money at you with no equity position expected in return.
And if these are loans, What is the collateral?
My suspicion: bailouts galore. Why? What this judge has done is to declare that the government, i.e. the taxapayer, can come save you and throw money at you with no equity position expected in return.
And if these are loans, What is the collateral?
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“unduly harsh treatment” in the context of three NY Times articles:
March 14, 2009
WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
JUNE 8, 2015
Kalief Browder, Held at Rikers Island for 3 Years Without Trial, Commits Suicide
Kalief Browder was sent to Rikers Island when he was 16 years old, accused of stealing a backpack. Though he never stood trial or was found guilty of any crime, he spent three years at the New York City jail complex, nearly two of them in solitary confinement.
JUNE 15, 2015
Ex-A.I.G. Chief Wins Bailout Suit, but Gets No Damages
The judge’s ruling also criticized the government for “unduly harsh treatment” of A.I.G. ....
Something is very wrong with our values.
March 14, 2009
WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
JUNE 8, 2015
Kalief Browder, Held at Rikers Island for 3 Years Without Trial, Commits Suicide
Kalief Browder was sent to Rikers Island when he was 16 years old, accused of stealing a backpack. Though he never stood trial or was found guilty of any crime, he spent three years at the New York City jail complex, nearly two of them in solitary confinement.
JUNE 15, 2015
Ex-A.I.G. Chief Wins Bailout Suit, but Gets No Damages
The judge’s ruling also criticized the government for “unduly harsh treatment” of A.I.G. ....
Something is very wrong with our values.
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I fear that it's not our values that are the problem, but the way in which our laws pervert justice.
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That...and three badly broken branches of govt.
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We aren't as far from the days of monarchs and peasants as we'd like to believe.
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On to the Supremes.
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Bite your tongue! The Muses forbid! Good god NO!
I assume Mr. Greenberg will support recipients of non-corporate welfare as they sue the government as well?
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Certainly if there is evidence they supported him
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It depends. Do those "recipients of non-corporate welfare" make a $20 billion dollar profit for taxpayers, like AIG did?
AIG were the patsies. They were the fall guys for the other much more culpable crooks at the banks and brokers and the AIG bail out was cover for bailing out that bunch of crooks.
Is it co-incidence that Paulson used to be head of Goldman Sachs?
The judge recognised this if anyone goes the trouble of reading his opinion:
"…During the financial crisis, many financial institutions engaged in much riskier and more culpable conduct than AIG, but received much more favorable loan treatment from the Government…"
"…In contrast to the wrongful conduct of the above entities, no claims of fraud or misconduct have been brought by the Department of Justice against AIG for any of AIG’s actions in the years leading up to or during the financial crisis…."
Is it co-incidence that Paulson used to be head of Goldman Sachs?
The judge recognised this if anyone goes the trouble of reading his opinion:
"…During the financial crisis, many financial institutions engaged in much riskier and more culpable conduct than AIG, but received much more favorable loan treatment from the Government…"
"…In contrast to the wrongful conduct of the above entities, no claims of fraud or misconduct have been brought by the Department of Justice against AIG for any of AIG’s actions in the years leading up to or during the financial crisis…."
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How much more court time will be wasted? If they didn't bail out AIG, would of been a multiplier effect, and would of had a larger negative effect. The Federal Reserve Bank should be applauded for tis actions. The judge seems incoherent on why AIG was shorted. Looking back after a massive recovery in the stock market and real estate market, the judge may not remember the extent of the crisis, however if you go back in to the time of the crisis, AIG was heading to complete collapse. Wheeler and Greenberg should go golfing together. For the rest of the world sees the case differently. Unless you work for CNBC a network filled with mostly Pro Republican ideals.
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I think white judges working in Mississippi in the year 1950 may have delivered more sensible verdicts than this guy Wheeler. No wonder people like Greenberg feel like they can file lawsuits like this one and stand a chance of winning.
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I'm just guessing, but is Wheeler a Republican-appointed judge? Maybe from the Reagan era?
6
Another ruling from a judge that probably can't balance his checkbook without help.
Until we empanel real experts that can look at the numbers and tell what happened this is the kind of ruling we can expect from judges with no clue whatsoever about finance...
Until we empanel real experts that can look at the numbers and tell what happened this is the kind of ruling we can expect from judges with no clue whatsoever about finance...
6
Whaaa! When my mom gave me money to pay the rent, she wanted proof that I wasn't spending it on beer instead!
Also, the takeover of AIG was orchestrated to maximize the benefits to the government and to the taxpaying public, according to the judges ruling. What's confusing about that is that this is somehow viewed as a bad thing.
Beggars can't be choosers, and should expect some scrutiny and loss of control. That goes with the territory of asking for a handout.
Also, the takeover of AIG was orchestrated to maximize the benefits to the government and to the taxpaying public, according to the judges ruling. What's confusing about that is that this is somehow viewed as a bad thing.
Beggars can't be choosers, and should expect some scrutiny and loss of control. That goes with the territory of asking for a handout.
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It's interesting looking at this ruling in the light of King-Burwell, and other recent "big" cases, where the courts have leaned to a judicial interpretation of intent, or even a ruling shaped by reality over the actual letter of the law. We should all welcome a appeal here, to the highest court. Hank Greenberg was a brilliant leader in his day, but his hubris and dollars cannot cover up the fact that we, the U.S. taxpayers, at greater risk than any AIG shareholders had ever thought they were in, not only saved those shareholders from a bankruptcy, but also provided the glue needed to hold the entire economy together.
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The judge does not know the law as pointed out in this article. How could this judge make this ruling when he didn't even know the law? Ridiculous! Too, harsh - lol,
13
So legally the government was wrong to rescue A.I.G. They should have been allowed to just go splat :-) So much for the "too big to fail" theory. Other financial institutions should keep this ruling in mind (but are unlikely to believe it would apply to them!)
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"Perplexing" is the most generous comment you could make. AIG should have been broken up along a reinstatement of Glass-Steagal; too bad Obama wasn't bolder.
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It is absolutely ridiculous that this judge could rule for the plaintiff, although thank goodness without monetary reward for AIG shareholders. They would have gotten absolutely nothing if the government had not intervened in 2008, which it did only to save the rest of us from a financial system that was collapsing due to the short-sightedness and greed of so-called financial geniuses who should have known better. Hopefully common sense will prevail in the higher courts and the government will win on appeal so that this case will not become a precedent. As for Hank Greenberg, he is a grasping, self-absorbed creep who in his old age appears to have achieved absolutely no wisdom about what life is really about or any humility at all. He needs to go away, please.
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My father worked at A.I.G. for over a decade, and described Mr Greenberg with two stories:
1. An employee was in an elevator in the main headquarters in New York, and Mr Greenberg stepped in. The employee said "Good morning, Mr Greenberg". Mr Greenberg scowled and said nothing. The employee, thinking he hadn't been heard, repeated "Good morning, Mr Greenberg". Mr Greenberg turned to him and snapped "Say that again and you're fired."
2. An error found its way into a report on Mr Greenberg's desk. Word went down the management chain: "Find out who's responsible, and fire him." Word went up the management chain: "The person responsible had been employed here less than a week, and had improper instructions. It wasn't really his fault." Word went back down the management chain: "Fire him, or I'll find a new manager who will."
Let's just say this lawsuit isn't out of character for him.
1. An employee was in an elevator in the main headquarters in New York, and Mr Greenberg stepped in. The employee said "Good morning, Mr Greenberg". Mr Greenberg scowled and said nothing. The employee, thinking he hadn't been heard, repeated "Good morning, Mr Greenberg". Mr Greenberg turned to him and snapped "Say that again and you're fired."
2. An error found its way into a report on Mr Greenberg's desk. Word went down the management chain: "Find out who's responsible, and fire him." Word went up the management chain: "The person responsible had been employed here less than a week, and had improper instructions. It wasn't really his fault." Word went back down the management chain: "Fire him, or I'll find a new manager who will."
Let's just say this lawsuit isn't out of character for him.
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The AIG intervention money all went to the big banks for insurance that AIG never should have contracted for had they done due diligence. So Jamie Dimond can say he never took any bailout money except he took 100% of the money due his company from AIG which he couldn't have gotten without our bailing out AIG.
36
Greenberg is the classic Monty Burns.
2
Maybe the next time the government can let the foolish banks and finance companies fail altogether with the gamblers (lenders and stockholders) losing everything. Maybe the government can also prosecute criminals such as the executives of AIG, Lehman, Goldman, Citi, JPM, Bank of America, and the rest.
It's never too late for accountability, the difference between a serious country and the compromised mess we inhabit now.
It's never too late for accountability, the difference between a serious country and the compromised mess we inhabit now.
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The problem with your suggestion is that, due to the removal of regulation (thanks Clinton and Rubin), the financial gamblers were able to intertwine themselves into industries that are essential to all citizens - somewhat like a financial fatal brain tumor.
You could not get rid of them without causing extensive damage that would wreck the part of the economy that depended on loans, money transfer etc.
You could not get rid of them without causing extensive damage that would wreck the part of the economy that depended on loans, money transfer etc.
Once again crooks get off easy they should be in jail. I am sick of the bankers causing these disasters and getting away with it.
156
They should be happy that AIG is still in business
41
Time for Wheeler to retire.
31
Had AIG "gone under", it would have taken down Goldman Sachs and there was no way in the world that Messr. Paulson would have let that happen. But the "real" story here is that the financial system is even more leveraged now than it was 7 years ago, there are all sorts of esoteric derivatives and other financial products that we don't even have a grasp on that the 2,000 page Dodd-Frank "reform" law can't even began to fathom.
No, there will be no further bailouts of the magnitude of 2008. The "smart" banksters are taking their tens of millions now, socking it away, knowing there will be no salvation next time there is a financial crisis.
No, there will be no further bailouts of the magnitude of 2008. The "smart" banksters are taking their tens of millions now, socking it away, knowing there will be no salvation next time there is a financial crisis.
34
I hope you are correct. Unfortunately, we have a new crop of Republicans in Congress eager to completely deregulate the banking industry.
I think when we have bailouts, we should offer them loans like they offer to poor people. Over 500% Payday Loans or Title Loans for the business. Seize all of the executives' assets. They get all the reward. They might as well get all of the risk.
Shakespeare's Merchant of Venice had the right approach. "A pound of flesh".
Poor people die when the rich people collapse the economy. There needs to be some penalty for collapsing the economy.
I think when we have bailouts, we should offer them loans like they offer to poor people. Over 500% Payday Loans or Title Loans for the business. Seize all of the executives' assets. They get all the reward. They might as well get all of the risk.
Shakespeare's Merchant of Venice had the right approach. "A pound of flesh".
Poor people die when the rich people collapse the economy. There needs to be some penalty for collapsing the economy.
3
"Legal experts say that the ruling, coupled with certain provisions of the Dodd-Frank financial overhaul law enacted after the crisis, makes it unlikely the government would ever rescue a failing institution, even if an intervention was warranted."
Well, if the USA ever hopes to regain its credibility as the country that has the right to lecture other countries (e.g. Japan in the 1990s) on the need to let their "zombie banks" and other ailing financial institutions fail in the name of what Mitt Romney called "creative destruction"--then no bailouts ever again for a financial institution.
Well, if the USA ever hopes to regain its credibility as the country that has the right to lecture other countries (e.g. Japan in the 1990s) on the need to let their "zombie banks" and other ailing financial institutions fail in the name of what Mitt Romney called "creative destruction"--then no bailouts ever again for a financial institution.
17
I'd love to see poor people use this case as a basis for suing Payday lenders and Title lenders.
"Inexplicably, that line of logic did not extend to the judge’s ruling that the government had unfairly taken advantage of A.I.G. by requiring tough loan terms, including the equity stake and a 12 percent interest rate."
Payday lenders have over 500% interest rates and require access to bank accounts and other assets. Title lenders have over 500% interest rates and require the title of the person's car.
It seems like A.I.G.'s terms were quite good compared with how banks treat the poor.
I say we use the Title Loan company's form for the next bank bailout. 500% interest and the title of the company? Then, see how bankers like their own medicine.
"Inexplicably, that line of logic did not extend to the judge’s ruling that the government had unfairly taken advantage of A.I.G. by requiring tough loan terms, including the equity stake and a 12 percent interest rate."
Payday lenders have over 500% interest rates and require access to bank accounts and other assets. Title lenders have over 500% interest rates and require the title of the person's car.
It seems like A.I.G.'s terms were quite good compared with how banks treat the poor.
I say we use the Title Loan company's form for the next bank bailout. 500% interest and the title of the company? Then, see how bankers like their own medicine.
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