“Asinine” is the word the New York Times is using to describe Maurice “Hank” Greenberg’s $55 billion lawsuit against the United States over the Federal Reserve’s seizure of the AIG insurance combine at the start of the Financial Crisis. “Mostly insane” is the phrase the New Republic is using to describe the same suit, which it also calls “ridiculous.” The New Yorker, which sets Mr. Greenberg down as an “old coot,” characterizes his lawsuit as an “absurdist comedy.”

The critics of the case seem strangely sneering in respect of the claim made by Starr International (Mr. Greenberg’s company is the actual plaintiff) that the Fed violated its rights under the Fifth Amendment. The Fifth prohibits the government from taking property for public use without “just compensation.” Starr reckons that would be tens of billions of dollars. The critics accept the government’s contention that it was a bailout, a boon to AIG, and they ignore the most explosive question:

If what the Federal Reserve forced on AIG was a “bailout” and not a “taking,” why weren’t AIG’s shareholder’s given a chance to vote? The New Republic, to cite but one of the recent dispatches, mocks Starr’s complaint as “a highly selective narrative of the AIG bailout.” Yet neither the New Republic, nor the Times account by Noam Scheiber nor the New Yorker’s by John Cassidy, grapples with the breath-taking timeline in which a vote was denied to the shareholders. After all, if it were really a bailout, why would they have objected, as they did?

By our lights this gets to the heart of the case at a time when even National Public Radio and ProPublica are starting to look at the Fed. In September 2008, when Chairman Bernanke made his move against AIG, the insurance company’s management had “flirted” with the idea of a shareholder vote. AIG management went so far as to tell the Securities and Exchange Commission that “the warrant it issued the Fed to obtain up to 79.9% of AIG’s common stock was ‘subject to shareholder approval.’”

AIG’s management even told the government that it “anticipates calling a special meeting for such purpose as promptly as practicable.” The Sun sprang on that point in an editorial the following day, suggesting it would put AIG’s shareholders in a better position than the owners of Fannie Mae, which had been seized by the government earlier in September. A vote, though, would have made the deal subject to approval by Mr. Greenberg, who’d been forced out of AIG management (and after whose departure AIG got itself into trouble).

It’s important to grasp what happened. The Fed’s Open Market Committee set the stage for the seizure of AIG on September 16. On the 18th, President George W. Bush suggested the government takeover of AIG and Fannie Mae would “improve investor confidence.” The Sun issued an editorial on the 19th called “Confidence Game,” saying it, for one, was “skeptical.” It noted, though, that at least AIG shareholders “are being given the courtesy of a vote before about 80% of their company is taken by the federal government.”

No sooner did the Sun’s editorial hit the newsstands than AIG amended its filing with the government, deleting the promise of a shareholder vote. And so Starr International’s property was seized. Oh, there will probably be a chorus to assert that the property by then was of no value, bust. Mr. Greenberg clearly doesn’t agree. And for the record, the Federal Reserve was of two minds on the point, as is evident from the minutes of the September 16 meeting of the Open Market Committee.

The AIG situation was raised by William Dudley, manager of the Open Market Account. He warned that AIG’s “parent company is basically going to run out of money — today, tomorrow, Thursday, or very, very soon.” Then he made an important admission, characterizing as “a little unclear whether AIG’s problems are confined just to liquidity” and adding: “It also may be an issue of how much this company is really worth.” It is precisely Greenberg’s contention that it was the former, a liquidity problem, that AIG was facing and that it had many billions in value.

Much of the narrative in this editorial was covered by the editor of the Sun in February in an op-ed piece in the Wall Street Journal. We sketch the story here again because Starr International’s claims strike us anything but “asinine,” “insane,” or “ridiculous.” Judge Wheeler of the Court of Federal Claims is no dummy. He doesn’t have to allow frivolous lawsuits to proceed, and he knows that property rights are at the core of the Fifth Amendment. It certainly looks to us like the Federal Reserve came to understand that there was value in what it was seizing from Mr. Greenberg. The United States Treasury eventually reckoned its “return” on the “bailout” at $22.7 billion, which even after Mr. Bernanke is still a pretty penny.