Recently B. Bernanke, former Fed’s president, explained the situation with American International Group in 2008. He said that he had been disquieted with the position of the insurance company which had been on the verge of collapse and he had been thinking of not punishing but of rescuing AIG.
$85 Billion Loan Aiming to Save AIG
Former top government officials including B. Bernanke testified before the federal court that they had taken only legal actions in order to bail out AIG.
On the second day of the court session B. Bernanke said that he had been concerned that the insurer’s top manager had not been able to identify and overcome their problems. He also said that the private sector had seemed to be a great solution for him.
As a result, $85 billion loan had been probated by Federal Reserve headed by Mr. Bernanke for the insurance company. According to his story, such money help had not been predatory as it should have strengthened the position of the insurer on the market.
It should be also mentioned that the loan resulted in almost $183 billion. This is the sum which was repaid by AIG in 2012 providing the government with considerable amount of profit.
The Washington’s’ Court of Federal Claims considers the issue.
AIG Says the Lending Was Predatory
H. Greenberg, former AIG CEO, who had kept a controlling stake of the enterprise before the situation in 2008, sued the state in 2011. He claimed that the interest rate which was more than 12% per annul and around 80% of AIG’s stocks had been too big. As a result AIG shareholders started losing profits illegally.
Greenberg’s lawyer D. Boies tried to prove in the face of the court that the loan provided to AIG had been a predatory deal while the other US financial organizations had got real support in troubles.
At the hearing Boies claimed that Fed had showed much forbearance when structuring widespread emergency online loans. Boies also insisted on the fact that AIG had been robbed by the Fed because the governors had sought to punish the company for deliberated maladministration on the eve of the financial crisis.
The insurance giant faced difficulties when bank mortgage loans which were insured with the help of AIG were referred to bad loans. H. Paulson, former Treasury secretary, attested that the measures taken to save AIG had been actually retributive.
B. Bernanke was accused by D. Boies of not providing AIG with really beneficial loan program that had been possible for that moment. Boies was also curious about whether Fed had legally turned down for a loan those companies which had taken part in political life. He aimed to show that Fed had been reasonable while implementing this policy.
B. Bernanke replied that he did not have any relation to the compilations of the loan rates and terms. He also said that Fed had to be stiff when providing help large financial organizations so that it would not have been a lucky strike to shareholders. He also said that it had been a good way to minimize the risk of the loan and there had been no any other intent.
B. Bernanke also said that Fed had been concerned that AIG was too much dependent on the government aid.