Greenberg Sues U.S. Over A.I.G. Takeover
Together, the Starr lawsuits seek at least $25 billion in damages, which is the value of A.I.G. shares held by Starr before the government bailed out the insurer. But as they progress, Starr International’s lawyers will request information about the decisions to rescue A.I.G., including documents and e-mail traffic between the Treasury, the New York Fed, A.I.G. and its trading partners.
The court actions may fill in some of the details surrounding the takeover that remain shrouded in secrecy, especially the decision by the Fed to unwind the credit insurance the company had written on souring mortgage securities and pay A.I.G.’s trading partners in full. Mr. Greenberg declined to comment.
A.I.G.’s credit insurance positions were closed out in November 2008. It later emerged that New York Fed officials chose to pay the insurer’s trading partners 100 cents on the dollar, even though some institutions were willing to accept a discount. The New York Fed also tried to keep A.I.G. from identifying the institutions that received the payouts, even though the insurer argued that such disclosures were called for under securities laws.
Critics have called the Fed’s decision a backdoor bailout for prosperous institutions that had dealings with A.I.G. Only later were these institutions identified; they included Goldman Sachs, the French bank Société Générale and Deutsche Bank.
The lawsuit against the New York Fed also says that the Fed breached its duty to A.I.G. shareholders by requiring that the company release these trading partners from any possible legal actions related to the mortgage securities it had agreed to insure.
A report on the A.I.G. takeover published last month by the Government Accountability Office found inconsistencies and contradictions in New York Fed officials’ explanations for why it paid A.I.G.’s trading partners in full. The report also noted that the New York Fed’s decision to make these institutions whole on the credit insurance written by A.I.G. disregarded the expectations of Fed officials in Washington.