Former U.S. Treasury Secretary Timothy Geithner defended the 2008 bailout of American International Group Inc. for a second day on Wednesday, struggling at times to respond to increasingly contentious questions about the government's efforts to rescue the insurance company as it stood minutes from bankruptcy.
The questions came in the second week of trial in a lawsuit brought by Hank Greenberg, a major AIG shareholder until the bailout and the company's chief executive until 2005. He contends the terms of the government $85 billion loan to AIG, which was extended in exchange for a nearly 80 percent stake in the company, cheated its shareholders.
A lawyer for Greenberg, David Boies, pressed Geithner Wednesday morning with questions about the extent of the government's control of the company and whether his team at the New York Fed had assessed whether AIG had taken imprudent risks.
The questions came after Geithner spent Tuesday describing the bailout as necessary to avert a second Great Depression.
The exchange on Wednesday grew so heated that at one point when Geithner asked if he could clarify one point, and Boies told him he could but that it would likely generate more questions. Geithner responded: "let's not, then."
Boies has sought to portray the government as punishing AIG shareholders with the terms of the loan without providing any basis for how it arrived at the punishment.
On Wednesday he introduced transcripts, essay drafts and emails in which Geithner seemed to suggest the government had forced losses on AIG shareholders "proportionate to the mistakes of the firm" but that the government had not undertaken any specific analysis to determine what exactly those mistakes were.
On Wednesday Geithner said the government had forced losses on the shareholders of other financial institutions but that AIG was unique in the scale of the problems it faced relative to rival insurance companies and other financial institutions.
He also said that while his team undertook extensive efforts to assess the scale of the losses and liquidity issues that AIG faced in September 2008, they could not go back and assess the exact impact of each decision management had made that may have contributed to the losses.
"There's that thing about hindsight and stuff," Geithner said, to laughter in the courtroom.
The lawsuit won class action status in May 2013. Citing an estimate by Boies that "tens of thousands" of shareholders might be affected, a judge said "class certification is by far the most efficient method of adjudicating these claims."