US Appeals court holds crisis bailout of AIG lawful

Markets Associated Press

A federal appeals court has upheld as lawful the government's bailout of American International Group in the heat of the financial crisis. It overturned a lower-court decision favoring the insurance giant's former CEO.

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The ruling Tuesday by the U.S. Court of Appeals for the Federal Circuit said a company controlled by ex-AIG chief Maurice Greenberg didn't have a legal right to pursue its claim against the government. Greenberg had alleged that the $85 billion bailout of the teetering AIG in September 2008 violated the Constitution's Fifth Amendment by taking control of the company without "just compensation."

The unusual case raised the issue of limits on the government's power in responding to financial catastrophe. The new ruling handed a victory to the government.