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Hank Greenberg's AIG Case Might Not be Open and Shut

May 20, 2015 in Economics

By Thaya Knight

Thaya Knight

The scene is galling. Ousted AIG CEO Hank Greenberg, still stunningly wealthy by any standard, has sued the federal government for saving his company in the midst of a crisis when thousands of Americans were losing their jobs and their homes. It’s hard to feel sympathetic. And yet, it’s a core tenet of our country’s political philosophy that rights are not dependent on sympathy.

Greenberg, through his company, Starr International, claims that the government took 80% of the equity in AIG without paying just compensation, which the Constitution guarantees in the Fifth Amendment’s “takings” clause. The suit also alleges that the government, through the Federal Reserve Bank of New York, exceeded its legal authority in the way that it conducted the AIG bailout.

News of the lawsuit sparked outrage. “Ingrate” was perhaps the kindest word lobbed at Greenberg. And no wonder. American taxpayers forked over $182 billion to AIG. Now the very man at the company’s helm when it was making risky bets comes crying that he’s owed $40 billion more, that the government didn’t do a good enough job in rescuing his company. “Unsympathetic” doesn’t even begin to describe him. But in a crucial way, his case is indicative of the rule of law working as it should.

While the Starr case seemed like a longshot when it was filed in 2012, to the point of being called “frivolous,” few still believe the case is open and shut. Although a companion case was quickly dismissed in District Court, this case went all the way to trial this past fall. Judge Thomas Wheeler in the Court of Federal Claims is expected to decide the case soon.

The truth is it is too easy for the government to justify almost any injustice.”

Ultimately, however, the court’s ruling is less important than the fact that this case went to trial. The Fifth Amendment provides both the right against unjust takings by the government and the right to due process before the government can take life, liberty or property. Due process does not mean that no one’s property (or liberty) should be taken, but that the government must provide adequate justification for its action, through a defined and generally applicable process.

The truth is it is too easy for the government to justify almost any injustice. “What could we do?” is the refrain after any given crisis. The democratic …read more

Source: OP-EDS

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