Bernanke to give deposition in AIG bailout lawsuit

WASHINGTON — A U.S. judge has ordered that Federal Reserve Chairman Ben Bernanke can be questioned in a lawsuit against the government filed by the former head of American International Group Inc.

It is rare for a Fed chairman to be deposed in a lawsuit. But Judge Thomas Wheeler of the U.S. Court of Federal Claims said Monday that he made an exception because Bernanke has firsthand knowledge of the government’s decision to bail out AIG at the height of the financial crisis.

Hank Greenberg, the former AIG CEO, has sued the government over the $182 billion bailout, which AIG has since repaid. Greenberg claims the terms of the bailout were too onerous and is seeking at least $25 billion.

“The court cannot fathom having to decide this multibillion-dollar claim without the testimony of such a key government decision maker,” Wheeler said in his ruling.

Greenberg’s lawyers want Bernanke deposed on Aug. 16. Wheeler said that date was acceptable to him, though lawyers for the government may wish to choose another date.

Spokesman David Skidmore said the Fed had no immediate comment.

Wheeler said he will extend “deference and courtesies” to Bernanke in the conduct of the deposition and plans to attend the deposition “to provide appropriate judicial oversight.”

Former Treasury secretaries Henry Paulson and Timothy Geithner have agreed to give depositions in the case. Each played a key role in designing the bailouts.

The lawsuit was filed in November 2011 by Greenberg’s company Starr International, which was the largest AIG shareholder. It accuses the government of taking valuable assets from AIG’s shareholders without their consent or fair compensation, in exchange for the government’s 80 percent stake in the company. The government’s actions violated parts of the Fifth Amendment, the lawsuit contends.

Alanna Rutherford, an attorney at the firm Boies, Schiller &Flexner that is representing Starr International in the case, said the firm was pleased with the judge’s decision.

“This case seeks compensation for the stock of AIG shareholders that the U.S. government took in 2008 without authorization and without compensation,” Rutherford said in a statement.

New York-based AIG had considered joining Greenberg’s suit but decided not to do so in January, after the prospect of such action by AIG had already triggered public outrage.

The government says the allegations are groundless. AIG’s only alternative to not receiving federal aid was bankruptcy, which would have left shareholders with worthless stock, the New York Fed has said.

AIG nearly collapsed after making huge bets on mortgage investments that later soured. Federal regulators were concerned that if it were allowed to fail it would hurt the broader financial system, which was already reeling after Lehman Brothers collapsed in the fall of 2008.

The Treasury Department provided about $68 billion to AIG through its Troubled Asset Relief Program, or TARP. The remainder, $114 billion, came from the New York Fed.

AIG became a symbol for excessive risk on Wall Street and was criticized, among other things, for paying millions of dollars in bonuses to executives after it was bailed out.

In recent years AIG has undergone a massive restructuring that cut its size in half and turned its focus to its core business of writing insurance.

More in Herald Business Journal

Stan Jones (left) father of Vice Chairwoman Teri Gobin, gets a handshake from Jared Parks while Herman Williams Sr. hugs Bonnie Juneau (right) after the Tulalip Tribes and Quil Ceda Creek Casino held a groundbreaking ceremony for the new Quil Ceda Creek Casino Hotel on Tuesday at the Tulalip Reservation. The casino hotel will be built on 16 acres of ancestral tribal land and will feature a main casino that will showcase as many as 1,500 slot machines. (Andy Bronson / The Herald)
Tulalips break ground on new Quil Ceda Creek Casino Hotel

A 150-room hotel was added to what is now a $140 million project in Tulalip.

Teddy, an English bulldog, models Zentek Clothing’s heat regulating dog jacket. (Ian Terry / The Herald)
Everett clothing company keeps your dog cool and stylish

Zentek uses space-age fabrics to moderate the temperature of pets and now humans.

Trudeau snubs Boeing, unveils plan to buy used Aussie jets

Trudeau will be assessing the impact fighter jet contracts have on his country’s economy.

Boeing raises dividend 20%, continues stock buyback program

The manufacturer said it has repurchased $9.2 billion worth of its shares this year.

Everett engineers learn lessons from Mexico City catastrophe

Structural scientists went to help after the September earthquake there and studied the damage.

Providence Hospital in Everett at sunset Monday night. Officials Providence St. Joseph Health Ascension Health reportedly are discussing a merger that would create a chain of hospitals, including Providence Regional Medical Center Everett, plus clinics and medical care centers in 26 states spanning both coasts. (Kevin Clark / The Daily Herald)
Merger would make Providence part of health care behemoth

Providence St. Joseph Health and Ascension Health are said to be talking. Swedish would also be affected.

Hospital companies merge as insurers encroach on their turf

An anticipated deal between Providence St. Joseph Health and Ascension is only the latest.

DaVita to sell off medical groups including The Everett Clinic

Another round of health care consolidation means The Everett Clinic could soon get new ownership.

Engine trouble hits Air New Zealand’s 787 Dreamliners

A Rolls-Royce engine was shut down and was afterward found to be seriously damaged.

Most Read