Greenberg slaps US with $25B suit

Insurance titan Hank Greenberg fired both barrels at Uncle Sam yesterday to recover $25 billion he claims was unlawfully seized from him and other AIG shareholders to finance a bloated bailout of foreign banks and other AIG trading partners during the 2008 credit crisis.

Filing two lawsuits — one in Manhattan federal court and a harsher one in Washington’s Court of Claims — Greenberg and his holding company Starr International detailed a step-by-step “coercion scheme” that the Federal Reserve Bank of New York used to subdue the once-rich AIG and turn it into a secret piggy bank for bailouts of the world’s banks.

Greenberg, who over four decades leading AIG built it into the world’s largest insurer, said the New York Fed and US Treasury unlawfully forced AIG to take an $85 billion loan that it didn’t need from the government at sky-high interest of 14.5 percent plus an additional $37.8 billion loan on top.

Greenberg accused the New York Fed, led at the time by current Treasury Secretary Timothy Geithner, and the Treasury of the “taking of property and property rights without due process or just compensation” in numerous violations of the Constitution and other laws.

Adam Levitin, a professor at Georgetown Law School, said in an e-mailed comment to Reuters that it is “hard to imagine Hank winning.”

Levitin noted the AIG bailout had been approved by the insurer’s board and the terms “arguably” were fair.

Treasury said it is reviewing the matter and expects to defend its actions vigorously.

“The government provided assistance to AIG — and stopped it from collapsing — in order to prevent a meltdown of the entire global financial system,” Tim Massad, assistant secretary for financial stability, said in a statement. “Our actions were necessary, legal, and constitutional.”