I happened to have the TV on this morning tuned to CNBC and caught an interview with David Boies. He is representing Hank Greenberg in his lawsuit against the U.S. government regarding its takeover of AIG in 2008. As usual, Boies was a captivating speaker and with those of his interviewers (mostly Becky Quick) who tried to argue from a moralistic standpoint (rather than a legal one) against his client, he did a rather effective job of quickly exposing the flaws in their position.
Anyway, having just finished up Financing Failure, this case has become a lot more interesting to me. It sounds like the primary defense that the government will offer revolves around the notion of systemic risk and how the financial system would have imploded but for the government’s extraordinary acts. McKinley’s book points out over and over how the guys at the Fed and Treasury talked about how the world would end without the intervention, but never really laid out the case beyond rhetoric. It was almost as if, by stipulation, that assumption was correct. Well, through this case, maybe the government will really have to lay out that argument once and for all.
From a rooting standpoint, I think it would be rather satisfying to see the government lose. But, in the bigger scheme, there are no heroes here. AIG should have gone bankrupt.
