Judge says Bernanke can be forced to testify in AIG bailout lawsuit

Federal Reserve Chairman Ben Bernanke may be required to testify in a lawsuit filed against the United States for the former head of American International Group (AIG).

Judge Thomas Wheeler of the U.S. Court of Federal Claims ruled Monday that since he was a "central figure" in the decision to bail out the insurance giant during the financial crisis, his testimony would be critical to the shareholder suit.

"The court cannot fathom having to decide this multi-billion dollar claim without the testimony of such a key government decision maker," Wheeler wrote. "These facts constitute 'extraordinary circumstances' for the taking of Mr. Bernanke's deposition."

As is typical of Fed chairmen, Bernanke is judicious in choosing spots to make public remarks, with markets poring over his every word. But he might not have a choice about whether to testify about the AIG bailout.

The court did say it would extend "appropriate deference" to Bernanke as it pertains to how the deposition is conducted and when, given his status as a high-level government official, Wheeler said.

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The $25 billion lawsuit, which was filed in 2011 by the company of former AIG CEO Maurice "Hank" Greenberg, alleges that the government charged onerous interest rates on bailout funds and violated shareholders' rights when it assumed the vast majority of the company's stock.

The U.S. government had previously argued in court against having Bernanke testify in the case.

AIG, a poster child for public anger over Wall Street bailouts, came under heavy fire from congressional Democrats earlier this year when it considered signing on to Greenberg's lawsuit.

The insurance company's board ultimately decided not to join the case, but not before Democrats expressed their outrage at the company even contemplating a lawsuit against the government after being rescued by taxpayers with a $182 billion bailout.

AIG paid back the funds it received under the Troubled Asset Relief Program (TARP) in the fall of 2012.

— This story was updated at 12:16 p.m.