On Meet the Press, Brokaw asked Paulson about whether Greenberg (and other shareholders) could step in with a liquidity package in lieu of the Fed's deal. Paulson conveniently avoided the question.
Combine Paulson's silence with AIG's peculiar 8-K revision on Friday (which carefully mentions nothing about warrants or shareholder approval), and we can all conclude 1 of 2 things:
Either we should conclude the Fed can do whatever it wants whenever it wants without regard to the U.S. constitution or federal law, OR we can conclude that Paulson realizes his 11th hour takeover deal with AIG doesn't pass the legal sniff test.
If the former is true and the Fed rams this overreaching takeover down AIG's throat, then the stock's upside is severely limited. However, if the Fed is now realizing that the Fed Reserve Act of 1932 doesn't authorize them to take majority ownership in a US company (regardless of the circumstances which led to it), and subsequently wants out of the legal hassles and political pressures of sticking with the deal, then I see some major upside in AIG's stock once a new liquidity provider steps in.
The way the deal is structured, the Fed is lending up to $85 billion to AIG, and the U.S. government will effectively get a 79.9 percent equity stake in the insurer in the form of warrants, called "equity participation notes."
That doesn't mean the government owns 80 percent of AIG -- at least not yet, explained Jeffrey Lipshaw, an associate professor of law at Suffolk Law School