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A federal judge has ruled that the U.S. government overstepped its bounds when it bailed out American International Group, or AIG, during the financial crisis. But despite that ruling, he did not award the plaintiffs a monetary reward. NPR's Yuki Noguchi reports.
YUKI NOGUCHI, BYLINE: A federal claims judge handed AIG's former shareholders a symbolic victory, saying the government's unduly harsh treatment had no legitimate purpose. In response, the Federal Reserve, which extended what eventually ballooned into more than $180 billion in bailout funding, defended itself, calling its role in the takeover, quote, "legal, proper and effective." When it happened on September 16, 2008, the U.S. financial system was in mid-collapse. The crisis had already shut down or forced the sale of Bear Stearns, Lehman Brothers and Merrill Lynch. Suddenly, AIG, which insured nearly all big financial institutions, was itself at risk.
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UNIDENTIFIED WOMAN #1: They used to be the biggest insurance company in the world.
UNIDENTIFIED WOMAN #2: The Federal Reserve made the deal Tuesday to save AIG from collapse in what The New York Times describes as the most radical intervention.
UNIDENTIFIED WOMAN #3: The federal government announced an $85 billion bailout plan for the insurance giant AIG. The company was on the verge of bankruptcy.
NOGUCHI: Over the next four years, AIG stabilized, and the government eventually sold off its 80 percent stake at a profit. But in 2011, AIG's largest shareholder, former CEO Maurice - or Hank - Greenberg brought a class-action suit alleging it was not legal for the government to own equity in AIG. Many thought the case farfetched at the time. The judge did not award damages. Without the bailout, he says, AIG shareholders would've ended up in bankruptcy. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.