Richard D. Smith, Rocky Hill
The Oct. 23 front page article on former Federal Reserve Chairman Ben S. Bernanke’s talk at Princeton University (“Bernanke on bailouts: ’it …had to be done’ “) reports that Mr. Bernanke defended the Fed’s 2008 rescue of American International Group.
AIG had become came dangerously overextended by heavily insuring investments in subprime mortgage-backed securities. According to Mr. Bernanke, the failure of this insurance and pension fund giant would have caused a catastrophic cascade of other failures in the world’s interlocking financial system.
Staff writer Philip Sean Curran reports that Mr. Bernanke “did not mention that in July, a federal judge ruled that the Fed’s actions regarding AIG had been unconstitutional.“
But Mr. Curran himself does not mention that Judge Thomas C. Wheeler of the United States Court of Federal Claims (who actually made his ruling in June, not July) did not find that the rescue itself was unconstitutional; but specifically that the Fed’s terms — removal of AIG chief executive Maurice R. Greenberg and a 79.9 percent stake in the company as collateral for U.S. taxpayers — were “draconian” and illegal.
Mr. Curran also does not mention that the ruling came in a lawsuit filed by Mr. Greenberg himself, demanding an astonishing $40 billion in damages, nor that both his suit and Judge Wheeler’s decision have been widely criticized by legal experts.
Finally, Mr. Curran does not mention that the judge also acknowledged “the inescapable conclusion … that AIG would have filed for bankruptcy” without the Fed’s support and that he awarded Mr. Greenberg zero dollars in compensation. That’s right, absolutely nothing.
Richard D. Smith
Rocky Hill
