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US asks to stop Bernanke testify in $56bn AIG suit

The US administration has asked a federal judge to prevent Ben Bernanke testifying in court to answer Maurice "Hank" Greenberg's claims that the government treated American International Group (AIG) shareholders "punitively" when it bailed out the insurance giant in 2008.

Government lawyers told the US federal claims court on 9 July that Greenberg's company, Starr International, could not prove the "extraordinary circumstances" necessary to summon the Federal Reserve chairman into the $55.5bn class action.

Bernanke should not testify simply because he is a "high-ranking government official", they added.

The motion said that plaintiffs, including AIG's shareholders and its former CEO, could not show that the information sought from Bernanke "has not already been disclosed... [or] could not be sought through other avenues of discovery".

It added that taking the chairman away from his role of setting US monetary and financial policy, even for a day, could have "untoward results".

But the plaintiffs argue Bernanke was the final authority on decisions resulting in the government "taking without just compensation and/or illegally exacting" a 79.9 percent equity interest in AIG in September 2008.

Bernanke has previously hinted that retribution may have been a factor at the time of the $182bn bailout, a motivation that the plaintiffs have seized on to support their contentions.

On October 2008, Bernanke is alleged to have said: "The Federal Reserve ensured that the terms of the credit extended to AIG imposed significant costs and constraints on the firm's owners, managers, and creditors."

Plaintiffs cited this as evidence that the administration treated AIG shareholders punitively.

In addition, in a letter to Treasury secretary Henry Paulson in November 2008, Bernanke wrote: "The Federal Reserve is authorized under the Federal Reserve Act to extend credit in various forms, but is not authorized to purchase equity securities of financial institutions."

In the original complaint, plaintiffs alleged the government took $23bn-worth of shares for an "unjust" $500,000, and accused it of breaking the Fifth Amendment after it ignored a shareholders' vote against further seizures in June 2009.

The case continues.

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