October 22, 2013
What Does Bernanke Get When He Retires? He Gets Deposed.
Posted by David Zaring

I've been watching the various bailout takings suits against the US government with interest.  There are two in particular that are proceeding apace.  One is a suit by Chrysler and GM auto dealers who lost their franchises, in their view at the behest of the government, in exchange for the bailout of those companies.  Those plaintiffs have done well before the Court of Federal Claims, but will have to defend their efforts in an appeal certified to the Federal Circuit next month.

The other is a suit by Starr, Inc., controlled by Hank Greenberg, the former CEO of, and major stockholder in, AIG, againt the government for imposing disproporionate pain on AIG owners vis a vis other financial institutions that received a bailout.  That case has also done well before the CFC, and is now in discovery.  And David Boies, Greenberg's lawyer, hasn't kidding around about the discovery, either.  He has already deposed Hank Paulson and Tim Geithner on what they knew (presumably a lot), about the decision to structure the AIG bailout the way they did, and he noticed a deposition of Ben Bernanke that required the government to use a mandamus appeal to quash it, which it semi-successfully did last week.

It wasn't a thoroughly convincing quashing, though.  High ranking officials in office aren't supposed to be deposed, except when there is a showing of extraordinary circumstances, for two reasons.  It's disruptive, and it interferes with the deliberative processes of government.

These concerns go away, however, when you leave government.  As the Federal Circuit said, "There appears to be no substantial prejudice to Starr in postponing the deposition of Chairman Bernanke, if one occurs, until after he leaves his post. The deadline for discovery should, if necessary, be extended beyond the current close on December 20, 2013, for that purpose."

I'm not sure that Bernanke's deliberative process will actually tell the Starr plaintiffs very much about their case.  With takings claims, the focus is on what the government did, and whether that constituted a taking, rather than on why it did it.  A deposition might offer some details on whether the government was imposing a cost on particular people that should have been borne ratably by the taxpayers, which is what the takings clause is supposed to protect (Starr would probably like Bernanke to say that the government zeroed out AIG shareholders to punish them for failing to make sure their firm was being operated cautiously, for example).  But again, the question is whether, not why.

It does mean, however, that Bernanke can be pretty sure of at least one thing when he leaves the Fed.  He'll soon be under oath, testifying about the reasons why the AIG bailout was structured the way it was.

Administrative Law, Financial Crisis | Bookmark

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