Wonkblog: The architects of the 2008 financial bailouts have their day in court

Maurice "Hank" Greenberg, the 89-year-old former chairman of American International Group,wantsnothing morehis constitutional rights.Yes, he is suing the government, claiming that it had no authorityto bail outhis old company inthe financial crisis, insistingthat AIGdidn't need to be rescued anyway, and demanding thattaxpayers pay him and other shareholdersabout $40 billion. It's not about the money, though,he told Charlie Rose last year.

"We have a Constitution that says government cant take property without compensation," Greenberg said.

Presumably, the federal officials who orchestrated the rescue--including former Federal Reserve ChairmanBen Bernanke, former Treasury Secretaries Hank Paulson, and former New York Fed president Tim Geithner,all of whom will be called to testify at this week's trial -- would respondthat Greenberg received more than just compensation for shares of AIG that had become essentially worthless.

That was the argument Paulson made on the standon Monday. He also said, as he has previously, that AIG's shareholders had to bepenalized to discourage other firms from making risky bets in the future.

"When companies fail, shareholders bear the losses," Paulson said. "It's just the way our system is supposed to work."

He was dismissed after just two hours of testimony, although he'd been scheduled for six. Geithner is set to testify Tuesday and Bernanke later this week.

Manylawyers are skeptical of Greenberg's case. But whatever the ruling, he has arguably already won an important victory by bringingthe architectsof the bailout to a courtroom to answer questions about their actions.Greenberg filed suitin 2011;his lawyers only deposed Bernanke earlier this year, after government lawyers couldn't gethim off the hook.

Six years after the crisis, Bernanke, Paulson and Geithnerwill be forcedto defend theirstrategy of bailing outmajor financial institutions -- a strategy that has caused deep resentmenteven thoughthey saidtheir goal wasto savethe economy. The men havemade their casealready, in memoirs and in Congressional testimony, but now, theymust submit toadetailedcross examination under oath.

The casecouldmarktheculmination of a long national debate about how federal authoritiesreactedduringthe crash.

Giventhe nation's uneven economic recovery, thethree officials'decisions at the time remain controversial -- and not just among wealthy insurance magnates.

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Wonkblog: The architects of the 2008 financial bailouts have their day in court