US Appeals court holds crisis bailout of AIG lawful

MarketsAssociated 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.

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."

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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.