One of AIG’s Largest Shareholders Put the Terms of AIG’s Bailout on Trial - Michael Vitti Published on Quickreadbuzz.com

Moral Victory: Plaintiff Wins the Battle (Causation) But Loses the War (Damages)

AIG collapsed in the wake of Lehman’s bankruptcy filing and required a government bailout in order to avoid the same fate as Lehman. The plaintiff (AIG’s shareholders) contended that they were harmed by the relatively harsh bailout terms that were imposed on AIG but no other bailout recipients. The defendant (U.S. government) countered that AIG’s bailout terms were: (1) legal, and (2) benefitted the plaintiff because a bailout under relatively harsh terms was better than no bailout at all. This article explains why the court held that: (a) the terms of AIG’s bailout were illegal, yet (b) AIG’s shareholders were not harmed by the illegal terms.

Were the terms of AIG’s bailout legal?  Can the Government illegally take stock in a company yet not harm the company’s shareholders in the process? The United States Court of Federal Claims recently addressed these questions in Starr International Co. v. The United States.

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