Inverse Condemnation Comes to Wall Street

Today’s New York times (Gretchen Morgenson, Greenberg Sues U.S. Over A.I.G. Takeover, N.Y. Times, November 22, 2011, at p. B2 – click here) reports that Starr International, the firm of Maurice R. Greenberg, formerly a big time honcho at A.I.G., has sued Uncle Sam in the U.S. Court of Federal Claims, contending that Uncle’s takeover of A.I.G in the aftermath of the 2008 financial calamity, amounts to an uncompensated taking of property. Greenberg’s firm is represented by none other than David Boies, the hot-shot New York lawyer who, speaking of inverse condemnation, informs us that

“What these lawsuits say is that in our country, not even the government is above the law. When the government takes action, although it has enormous power, there are legal limits to what they can do. One of those limits is that they cannot take property even for a good purpose if they do it in violation of of legal protection or don’t give just compensation.”

You tell ’em, David!

The alleged taking, says the Times, “contends that the takeover of A.I.G. discriminated against the company and its shareholders by charging onerous interest rates on loans extended by the government — 14.5 percent initially — and by taking an 80 percent interest in the company over objections of shareholders.”

We don’t know the details of these financial machinations, but offhand it strikes us that a complaint that a financial intitution overcharged by collecting only 14.5% interest, smacks of chutzpa. Just ask some of those credit-card-holding poor slobs who are getting hit to the tune of 30% or so on their credit card arrears. They’ll tell you what high interest is.

There is also a companion lawsuit in the U.S. District Court againt the Fed which points out in its defense that without its intervention, A.I.G. would have gone into bankruptcy, and that the Fed helped to restore A.I.G. and thereby prevented a meltdown of the financial system. Which we take to mean that the Fed is raising the defense of ingratitude, which would be novel but interesting. Together, the lawsuits seek a recovery of $25 billion, knock on wood.

The article says nothing about the plaintiffs’ contentions of ripeness, and we can’t wait to see how that one turns out. So stay tuned, folks. This one should be entertaining.

Leave a Reply

Your email address will not be published. Required fields are marked *