does the executive branch of government have the legal right under constitutional law to bailout AIG?

if the executive branch is acting illegally,what legal measures can be taken?

The short answer is no. Although the Fed has the authorization to loan unlimited amounts to a company, it cannot buy a company. Despite the semantics with which the takeover took place, the Fed bought the company… However, there are likely no legal measures that can be taken at all.

Post Author: mark

2 thoughts on “does the executive branch of government have the legal right under constitutional law to bailout AIG?

    James

    (February 15, 2010 - 7:37 pm)

    The short answer is no. Although the Fed has the authorization to loan unlimited amounts to a company, it cannot buy a company. Despite the semantics with which the takeover took place, the Fed bought the company… However, there are likely no legal measures that can be taken at all.
    References :
    http://legalblogwatch.typepad.com/legal_blog_watch/2008/09/federal-bailout.html

    rickinnocal

    (February 15, 2010 - 8:12 pm)

    Yes it does. It’s an executive decision, and quite legal.

    Had they NOT acted, and allowed AIG to crash – likely bringing the whole US economy crashing into a depression – that might well have been an illegal dereliction of their duty to run the country in a responsible manner.

    James – I disagree totally with the position that holding the AIG stock as collateral is a ‘de facto sale’. The Fed is not taking ownership of the stock, and I disagree with the prophets who think that it will. AIG stock is at 9% of it’s value a month ago. I believe that as AIG pays down the loan the Fed will release the stock back to AIG, reducing the dilution of the original stockholders positions. If the paydown slows, the Fed may require AIG to sell some of the stock the Fed is holding as collateral and use the money to pay down the loan faster. Either way, I don’t believe we’ll see the Fed in a true ownership position.

    Richard
    References :

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