AIG Bailout Terms Defied Economic Sense, Expert Says

By Daniel Wilson (October 29, 2014, 7:51 PM EDT) -- There was no legitimate economic or "moral hazard" reason to support the punitive loan terms given to American International Group Inc. as part of its 2008 bailout, a plaintiffs' expert said Wednesday as trial continued in a shareholder suit over the deal's allegedly onerous terms.

In both testimony and demonstrative exhibits, Dr. Michael Cragg argued that the terms offered to AIG for its bailout, cited by several government officials as intentionally punitive, were irrational from an economic standpoint and possibly counterproductive to stabilizing the financial system during the 2008 crisis.

"[In a financial panic, a central bank should be] trying to...

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