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News of the Competition (01/09/2013)
MADISON, Wis. (1/9/13)

  • After receiving one of the largest government bailout packages during the financial crisis, the board of directors at American International Group Inc. (AIG) is contemplating whether to join a lawsuit accusing the U.S. government of implementing too-onerous terms in its bailout package of 2008-2009 (The Wall Street Journal Jan. 8 and The New York Times DealBook Jan. 7). AIG's board will meet today to listen to arguments for and against joining the $25 billion lawsuit, a source familiar with the matter told the Journal. In 2011, Maurice R. Greenberg, former CEO of AIG, who still is a major investor in the company, filed a lawsuit on behalf of fellow shareholders. Greenberg has urged AIG to join the suit--a move that could push the government to enter settlement talks, the Times said. Although the suit does not say that government help was unnecessary, it posits that the rescue was onerous because it took a 92% ownership stake in AIG, involved high interest rates and sent billions of dollars to AIG's Wall Street clients, the Times said. That rescue obviated tens of billions of dollars that shareholders would have received--and also was in violation of the Fifth Amendment, which forbids ceasing private property for "public use, without just compensation," the Times said. The case is pending in federal claims court in Washington, D.C., and the government will present the case against joining the lawsuit, the source told the Journal
  • Bank of America (BofA) Monday sold off roughly 20% of its mortgage loan-servicing business as a component of its agreement to pay Fannie Mae more than $11 billion to settle an ongoing dispute over bad mortgages (The New York Times DealBook Jan. 7). The move is a continuance of BofA's large-scale retreat from an expensive expansion into the home mortgage market, the Times said. That payment settles allegations that before the financial crisis BofA made bad mortgages that home buyers had a difficult time repaying, and then sold the problem mortgages to the U.S. government, the Times said. Taxpayer-supported Fannie Mae sustained huge losses when borrowers defaulted, the Times said …


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