WASHINGTON (AP) ― Timothy Geithner, a key player in the U.S. government’s 2008 bailout of American International Group Inc., on Tuesday affirmed in court his belief that the insurer’s rescue was needed to avert disaster for the financial system.
A lawyer grilled Geithner at the trial of a lawsuit brought by former AIG Chairman and CEO Maurice Greenberg. He is suing the federal government for about $40 billion in damages over its handling of the bailout, asserting that it violated the Constitution’s Fifth Amendment by taking control of the insurance giant without “just compensation” for the shares it received.
The $85 billion loan package for AIG, which was teetering toward bankruptcy in September 2008, gave the government control of 80 percent of the New York-based company’s stock. Geithner was president of the New York Federal Reserve at the time and later Treasury secretary.
While upholding the necessity of the AIG bailout, Geithner in his testimony Tuesday also acknowledged that he had said the bailout “wiped out” AIG shareholders.
