Still Remember those banking bail outs?

Posted: Jun 9, 2015

Americans were angry when Wall Street’s greedy and risky behavior triggered a global financial crisis in 2008. They were angrier still when the government had to borrow and spend hundreds of billions of dollars to rescue mortgage giants Fannie Mae and Freddie Mac, the largest banks and the insurance company AIG. They were outraged when they found out that executives at those enterprises were continuing to receive big salaries and bonuses.

So just imagine how outrageous it would be if some Wall Street sharpies went to court to argue that they didn’t benefit enough from the bailouts and that taxpayers should pay them tens of billions of dollars more.

In fact, they did. And, according to legal observers, they just might prevail.
“Lawsuits of the Rich and Shameless” is how the comedian Jon Stewart dubbed it.

“An absurdist comedy . . . worthy of the Marx Brothers or Mel Brooks,” wrote John Cassidy, the New Yorker’s economics correspondent.

For taxpayers, it looks to be another example of the old adage that no good deed goes unpunished.

In two separate cases, the government now stands accused of overstepping its authority when it took extraordinary measures to prevent a financial meltdown in the fall of 2008. The Wall Street figures who are suing say their property was seized without compensation, in violation of the Constitution. One case was brought by Maurice “Hank” Greenberg, the legendary former chief executive of AIG who built it into the world’s largest insurer. Filing the other case is a group of hedge funds that bought Fannie and Freddie stock for pennies per share after the companies were put in government conservatorship.

Federal district court judges in Washington and New York initially dismissed both challenges. Their opinions noted, somewhat pointedly, that the Wall Street plaintiffs were not only unharmed but actually came out better off as a result of the government rescues. Yet both groups have now found a more sympathetic hearing a stone’s throw from the front gate of the White House, at a little-known brick courthouse called the U.S. Court of Federal Claims.

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