EMAILS SHOW FED UNCERTAINTY ABOUT AIG BAILOUT…

Email exchanges between attorneys at the Federal Reserve revealed uncertainty about the propriety of the US government’s rescue of AIG. The emails were introduced by David Boies, the attorney for ex-AIG boss Maurice “Hank” Greenberg’s Starr International, which is challenging the constitutionality of the 2008 bailout before Judge Thomas Wheeler in the US Court of Federal Claims in Washington. The suit alleges that the government violated AIG shareholders’ rights when it extended the struggling company an $85bn rescue loan in exchange for a 79.9% stake in the company. Boies showed the emails and other communications to his first witness in the case, Federal Reserve Board of Governors attorney Scott Alvarez. In one, written to Alvarez in October 2008 (a month after the government stepped in to prop up AIG) by New York Fed general counsel Thomas Baxter, Baxter wrote that “we agree there is no power” for the Fed to hold AIG shares. Alvarez testified Tuesday that he believed that the Fed could hold the shares on an interim basis but not for a long period. AIG repaid the last of its total $182bn assistance package in 2012.