The U.S. Treasury’s sale of its remaining stake in American International Group Inc. (AIG) will bring in $7.6 billion, giving the government a total profit of $22.7 billion from its crisis-era bailout of the insurer. The share offering will close the chapter on the bailout in 2008. As you may recall, the government wound up giving AIG up to $182 billion of government support. At one point, the government estimated that it would never recover all of the bailout money, but as AIG restructured and returned to viability, it was able to repay the entire rescue fund plus generate a profit for U.S. taxpayers.
The Treasury agreed to sell 234.2 million shares to investors for $32.50 a share. Treasury has additional AIG warrants that it can sell to boost the government’s $22.7 billion of total returns so far. Jim Millstein, the Treasury’s former chief restructuring officer, had this to say:
No taxpayer should be pleased that the government had to rescue this company, but all taxpayers should be pleased with today’s announcement, ending the largest of the government’s financial industry bail-outs with a profit to the Treasury Department.
AIG was rescued just before it would have been forced to file for bankruptcy protection in September 2008 as losses on risky derivatives mounted. It was bailed out as the world’s financial system stood at the brink of disaster, shortly after Lehman Brothers filed for bankruptcy and Merrill Lynch sold itself to Bank of America Corp.
AIG was one of the Treasury Department’s most hotly-contested bailouts. U.S. lawmakers began calling for Treasury Secretary Timothy Geithner’s resignation after it was revealed that AIG paid $165 million in retention bonuses to employees of the derivatives unit that had been blamed for the company’s financial distress at that time. The company also funneled over $90 billion of taxpayer money – more than half the funds the government used to rescue AIG – to various European and Wall Street banks, including Goldman Sachs, Deutsche Bank and Barclays Plc. None of this was popular with the American people. But it appears all will now end well with the AIG bailout.
Source: Insurance Journal
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