(Image source: Gothamist)

BY JIM FLINK

The former head of AIG is suing the federal government -- alleging a breach of the Constitution. It all stems from the 2008 government takeover of the insurance giant. The Los Angeles Times has a summary...

“Former AIG CEO Maurice "Hank" Greenberg's current company — Starr International — filed lawsuits Monday in federal courts against the Treasury Department and the Federal Reserve Bank of New York. The suits accuse the government of taking valuable assets from AIG's shareholders without their consent or fair compensation, in exchange for the government's 80% stake in the company.”

Which, Greenberg claims, is a violation of the Fifth Amendment. On a roundtable on The Wall Street Journal, reporters note, it’s not a new argument.  But it continues to be a volatile one.

“And of course the government, Tim Geithner and Ben Bernanke and various people, obviously their view was ‘we have to do something to save the financial system.’  And what Mr. Greenberg’s company is saying in this lawsuit today is ‘that’s a fine aim, it’s a fine aim to preserve the financial system, but the Constitution does not permit you to do what you did.’”

Bloomberg Businessweek talks with the Treasury Department’s assistant secretary for stability who says, not only was the government’s takeover legal, it was necessary.

“It is important to remember that the government provided assistance to AIG -- and stopped it from collapsing -- in order to prevent a meltdown of the entire global financial system … Our actions were necessary, legal and constitutional.”

The Hill takes a look back at what happened then, which led up to the government stepping in...

“AIG became a flashpoint for the financial crisis after it was revealed that the company paid out $165 million in bonuses to employees after receiving federal support, making it the subject of public scorn and drawing presidential rebuke..”

Ulimtately, the government poured 182 billion dollars into AIG. But it is the government’s actions of bailing out some companies, while taking over AIG, which is the center of the suit. CNN cites the lawsuit...

"Rather than granting AIG the same access to liquidity assistance that it granted to numerous other institutions, including various foreign companies, the government instead chose to use the difficulties faced by AIG to implement a takeover of the company without just compensation,"

NPR reports, The U.S. government still owns about 77 percent of AIG.