4 ms·
The meat of this fascinating ruling is in pg's 8 - 10. Quoting: Moreover, there is nothing in the Federal Reserve Act or in any other federal statute that wo
by fraserharris 11y ago
The meat of this fascinating ruling is in pg's 8 - 10. Quoting:
Moreover, there is nothing in the Federal Reserve Act or in any other federal statute that would permit a Federal Reserve Bank to take over a private corporation and run its business as if the Government were the owner. Yet, that is precisely what FRBNY did. It is one thing for FRBNY to have made an $85 billion loan to AIG at exorbitant interest rates under Section 13(3), 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.
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The analysis here leads to the conclusion that, if the Government had done nothing to rescue AIG, the company would have gone bankrupt, and the shareholders’ equity interest would have been worthless. Accordingly, the Court finds that the first plaintiff class prevails on liability because of the Government’s illegal exaction, but recovers zero damages.
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As the Court noted during closing arguments, a troubling feature of this outcome is that the Government is able to avoid any damages notwithstanding its plain violations of the Federal Reserve Act. Closing Arg., Tr. 69-70. Any time the Government saves a private enterprise from bankruptcy through an emergency loan, as here, it can essentially impose whatever terms it wishes without fear of reprisal. Simply put, the Government often may ignore the conditions and restrictions of Section 13(3) knowing that it will never be ordered to pay damages. With some reluctance, the Court must leave that question for another day.
- randomname2 11y agoSo AIG head Greenberg was indeed correct in claiming the government overstepped its legal boundaries in its "unduly harsh treatment of AIG in comparison to other institutions" which was "misguided and had no legitimate purpose." Further interesting quotes: "The weight of the evidence demonstrates that the Government treated AIG much more harshly than other institutions in need of financial assistance. In September 2008, AIG’s international insurance subsidiaries were thriving and profitable, but its Financial Products Division experienced a severe liquidity shortage due to the collapse of the housing market. Other major institutions, such as Morgan Stanley, Goldman Sachs, and Bank of America, encountered similar liquidity shortages. Thus, while the Government publicly singled out AIG as the poster child for causing the September 2008 economic crisis (Paulson, Tr. 1254-55), the evidence supports a conclusion that AIG actually was less responsible for the crisis than other major institution." The illegality of this decision may also have dramatic repercussions for all future government/Fed bailouts of further banks.
- Shivetya 11y agoMy favorite part... The court noted “a troubling feature of this outcome is that the Government is able to avoid any damages notwithstanding its plain violations of the Federal Reserve Act…Simply put, the Government often may ignore the conditions and restrictions of [the Act] knowing that it will never be ordered to pay damages.”
- dummy7953 11y agoI'm not sold on the "misguided and had no legitimate purpose" aspect. The banks knew they were going to wreck the world economy. AIG had its thumb up its butt & didn't realize they were insuring corporate criminals.