June 10, 2015
Checking In With The Takings Cases
Posted by David Zaring

The Washington Post has a story on the AIG and Fannie and Freddie cases, which, as you might remember, use the Takings Clause to go after the government for its financial crisis related efforts.  In theory, that's not the worst way to hold the government accountable for breaking the china in its crisis response - damages after the fact rectify wrongs without getting courts in the way.  And I've written about both cases, here and here.

Anyway, the Post has checked in on the cases, and the view is "you people should be worrying more about the possibility that the government may lose.

Greenberg is asking the court to award him and other AIG shareholders at least $23 billion from the Treasury. He says that’s to compensate them for the 80 percent of AIG stock that the Federal Reserve demanded as a condition for its bailout. Judge Thomas Wheeler has repeatedly signaled his agreement with Greenberg. A decision is expected any day.

In the Fannie and Freddie case, the decision is further off, with the trial set to begin in the fall. The hedge funds are challenging the government’s decision to confiscate all of the firms’ annual profits, even if those profits exceed the 10 percent dividend rate that the Treasury had initially demanded. This “profit sweep” effectively prevents the firms from ever returning the government’s $187 billion in capital and freeing themselves from government control.

Earlier this year, Judge Margaret Sweeney refused to dismiss the case and gave lawyers for the hedge funds the right to sift through the memos and e-mails of government officials involved. Within weeks, Fannie and Freddie shares, which had been trading at about $1.50, started trading as high as $3 based on rumors that the documents revealed inconsistencies in government officials’ statements.

They checked in with me on the article, so there's that, too.

Administrative Law, Finance, Financial Crisis, Financial Institutions | Bookmark

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