A federal judge has ruled that Ben Bernanke will be deposed in a class-action lawsuit involving the Federal Reserve’s 2008 bailout of AIG.
The lawsuit in question, led by former AIG executive Maurice Greenberg, alleges that AIG’s bailout illegally forced shareholders to accept major losses on their investments.
Greenberg’s lawsuit is the Platonic form of ingratitude. He admits the bailout was the only way for AIG to avoid bankruptcy, but contends that because shareholders weren’t given the full value of their stock, the government violated AIG's Fifth Amendment rights against unfair seizure of private property.
Though the idea of stockholders suing the government because they didn’t get a generous enough bailout may seem laughable, the case has legal standing. The federal government lost its motion to dismiss, and a federal judge approved its certification as a class-action lawsuit.
Since the case has legal merit, it is completely necessary that Ben Bernanke be deposed as part of the discovery process. Bernanke oversaw the bailout from the idea phase to its implementation, and he can answer key questions about how much pressure the government put on the company and shareholders to accept the proposed terms. If Bernanke could avoid testifying, it would set a dangerous precedent about federal officials being insulated from lawsuits stemming from their decisions.
Government attorneys made two arguments for why Bernanke shouldn't need to be deposed: He had already testified under oath about the bailout in front of congressional committees, and government officials should not be deposed about official actions they take. Although the Federal Reserve’s independence from political pressure and public opinion is essential to the central bank’s effectiveness, this shouldn't give its leaders carte blanche to be excused from legal proceedings.
Bernanke enjoys qualified immunity the same way all federal employees do. This means that he is protected from lawsuits for violating people’s constitutional rights so long as he does not explicitly violate written law. This is designed to protect federal employees from frivolous lawsuits brought by fringe political figures, and it’s a sensible precaution. But nowhere is he given general immunity from ever being involved in litigation, and since his testimony is essential to finding out if Greenberg’s lawsuit has merit, his deposition is warranted.
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