It is with great pleasure that I quote Judge Wheeler :
“The Government profited from the shares of stock that it illegally took from AIG and then sold on the open market.”
“The government’s unduly harsh treatment of AIG in comparison to other institutions seemingly was misguided and had no legitimate purpose,” (Sound familiar?)
“A. The Illegal Exaction Claim
Upon a full consideration of the record and the arguments of counsel, the Court finds that FRBNY’s taking of 79.9 percent equity ownership and voting control of AIG constituted an illegal exaction under the Fifth Amendment. The Board of Governors and the Federal Reserve Banks possessed the authority in a time of crisis to make emergency loans to distressed entities such as AIG, but they did not have the legal right to become the owner of AIG. In the Federal Reserve’s history of making hundreds of emergency loans to commercial entities, the loan to AIG represents the only instance in which the Federal Reserve has demanded equity ownership and voting control. There is no law permitting the Federal Reserve to take over a company and run its business in the commercial world as consideration for a loan.”
The recognition that our government acted without regard to the law in the AIG bailout guarantees we will be victorious. This was a profound victory for the truth, Judge Wheelers condemnation of our government’s lawlessness will reverberate through the halls of power. The magnitude of this victory cannot be overstated.
I must say I was not surprised to see the desperate attempts by our opponents to spin today’s victory into a defeat.They triumphantly ignored the fact that our government was found guilty and focused solely on the lack of damages.The only thing that matters today is that Hank won, the lack of damages has no relation to our situation whatsoever.If all of AIGs profits were being seized like the GSEs Judge Wheeler would have ended the sweep today.It is that simple.
When considering the potential damages, Judge Wheeler ruled that he “must examine what would have happened to A.I.G. if the government had not intervened.” “The inescapable conclusion is that A.I.G. would have filed for bankruptcy,” he wrote. “In that event, the value of the shareholders’ common stock would have been zero.”
Now let us ask: what would have happened if Treasury and FHFA never did the 3rd amendment? We reach a far different outcome: The GSEs would have been able to pay off their debt and be on the path to being well capitalized successful companies.
I have been on quite the roll lately. In the post from 4/28 I did say:”Just as I boldly predicted the Continental Western Iowa dismissal I now just as confidently predict a Greenberg victory.” https://timhoward717.com/2015/04/28/peter-wallisons-aei-calls-for-reformrelease-as-judge-wheeler-defends-omaha-beach-d-day-vet/
In light of today’s decision, It is with the utmost confidence that I will now predict that there is no way the governments illegal seizure of Fannie and Freddie profits will stand.
Robert King, our resident court expert, summed it up nicely in a conversation I had with him earlier today:
“My read of the AIG case is that the only reason they didn’t recover damages is because the “but for” analysis showed that without the loan, AIG would have gone completely bankrupt. In our case, but for the net worth sweep shareholders would have preferred shares at par.”
Our reader Ben also summed things up nicely with this quote in yesterday’s comments section:
“Gents, can we get one thing right here regarding the impact of AIG ruling on Fannie? The current construct of AIG ownership has all profit diverted to shareholders in accordance with standard equity ownership regulation. This is not the case for FNMA. The trial for AIG for Greenberg is seeking damages in a retrospective illegal exaction which is a one off event and this was not given to him. However, the exaction was indeed deemed illegal, and this is a boon for FNMA as precedence.
The FNMA trials are not seeking damages; we are looking for recapitalisation and profit to be restored to shareholders GOING FORWARD. Whatever the government has taken, keep it. The business of FNMA is sound enough to make more of it, and the business of FNMA has to be sound for the preservation of the fixed rate 30-year mortgage.”
(A few readers clarified that certain lawsuits are seeking damages, I believe his reference is referring to the “Perry Injunction”. Great job Ben, please comment more.
So tonight we celebrate on behalf of Mr. Hank Greenberg a true patriot who was not afraid to take on our government and demand they be held accountable for their brazen and lawless behavior.The press largely bashed him relentlessly ignoring the fact that he was a D-day vet who stormed Normandy beaches at the age of 17 years old. He lied about his age to join the war effort at the age of 14. Hank is a true American Patriot, who at the age of 14 exhibited more bravery and valor at the age of 17 than most of his critics could ever dream of having. The next time you are watching Saving Private Ryan ask yourself if you would have stormed those beaches as Hank did? Regardless of what your answer is, remember that Hank did, consider it the next time someone tries to bash him for demanding that the country he risked his life to defend be accountable to the rule of law. Tonight we salute you, Hank, Godspeed, my friend.You are exactly what made the greatest generation great.
Keep the Faith!
Starr Ruling: 268746137-Starr-vs-U-S-Re-AIG-Bailout
Edit: KM suggested that I add the following rock anthem, the funny thing is I was listening to this recently hoping I had the opportunity to use it, this truly is the post for it and we all know what comes next:
Edit 6/17/15Fairholme files motion to stay: https://timhoward717.files.wordpress.com/2015/06/61717-fairholme-motion-to-stay.pdf
“After discovery closes, Plaintiffs intend to move for leave to amend their complaint and include facts gleaned from discovery.”
I will likely be commenting more as well at some point.
Commentary by Peter Chapman from the Beard group:
“Fairholme, like many observers, says it’s mystified why the Government is attempting to segregate pre-Aug. 17, 2012 Shareholders and post-Aug. 17, 2012 Shareholders now. And in any event, Fairholme observes, it wouldn’t end the litigation before the U.S. Court of Federal Claims. Fairholme calls the Government’s motion a distraction from on-going jurisdictional discovery that doesn’t need to be decided right now. Fairhome also cautions Judge Sweeney that a ruling on the Government’s Supplemental Motion to Dismiss at this time could be premature.
Providing a quick citation to applicable case law, Cooper & Kirk points Judge Sweeney to Palazzolo v. Rhode Island, 533 U.S. 606, 630 (2001), where the U.S. Supreme Court held that a takings claim was “not barred by the mere fact that title was acquired after the effective date of the state-imposed restriction.”
The Government will, no doubt, be unable to restrain itself from responding to today’s motion and telling Judge Sweeney how it makes so much more sense to brief this issue and make a decision on its Supplemental Motion to Dismiss as soon as possible. ”
I will likely be commenting more as well at some point.