The Federal Reserve Bank of New York Monday asked a federal court in Manhattan to promptly dismiss a lawsuit alleging that the federal government “discriminated” against American International Group by taking it over rather than loaning it money when it ran into financial problems in September 2008.
The suit was filed in November by Starr International, a Switzerland-based firm controlled by Maurice “Hank” Greenberg, former chairman and CEO of AIG.
A companion suit was filed in the Federal Court of Claims in Washington making the same allegations against the federal government and seeking $25 billion in damages for Starr and AIG shareholders, including Greenberg. The federal government last month filed an answer to that suit also seeking prompt dismissal.
The Treasury’s answer to that suit in the Court of Claims takes a softer tone than the Federal Reserve’s response filed yesterday by John S. Kiernan, a partner at Debevoise & Plimpton, LLP, in New York.
The Fed response says, “The complaint’s effort to portray AIG and Starr as victims entitled to be paid tens of billions of taxpayer dollars ignores that AIG created the highly dangerous conditions that left the Federal Reserve Bank of New York with no practical alternative but to lend massive amounts to AIG to avoid a potential market-wide catastrophe.”
The complaint should be dismissed without further imposition of burdens on the Federal Reserve Bank of New York, and, ultimately, taxpayers, the response says.
It adds, “Although the complaint downplays AIG’s plight as ‘a liquidity problem, not a solvency problem’, the ‘liquidity problem’ was gargantuan and threatened AIG with bankruptcy.”
The response further states, “The complaint concedes that AIG’s ‘attempt to find a private-sector solution failed,’ as private parties were unwilling to lend the massive amounts AIG needed even on terms that plaintiff now describes as ‘unfair’ and ‘stealing the Company.’