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U.S. Profit From AIG Rescue: $15.1 Billion

Posted on 08 May 2012

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The U.S. government may wind up posting a profit of more than $15 billion from the rescue of American International Group Inc. (AIG), according to an independent projection released Monday.

The report by the Government Accountability Office, the investigative arm of Congress, highlighted how one of the most expensive and most unpopular bailouts of the 2008 financial crisis has turned out far better for the government than initially expected.

The GAO said that, as several aid efforts for AIG wind down and the company's finances improve, the government is likely to turn a substantial profit.
The government "could receive total returns of approximately $15.1 billion in excess of the assistance provided," the GAO report said.

The report comes a day after the Treasury agreed to sell $5 billion in AIG's common stock at $30.50 a share, taking advantage of the company's elevated share price. AIG bought $2 billion of the stock in the transaction, which reduces the Treasury Department's stake in the company to 63%, or $30.7 billion.

In 4 p.m. trading on the New York Stock Exchange on Monday, AIG's shares fell 99 cents, or 3%, to $31.84. The Treasury says its break-even' price level is $28.73 per share.

The government has completed two other offerings of AIG shares, gradually reducing its investment in the insurance company. The first, in May 2011, brought in $5.8 billion to the Treasury. The second, in March 2012, brought in $6 billion, of which AIG purchased $3 billion.
AIG has been gradually repaying its bailout funds, which at its height used more than $140 billion in taxpayer funds. In addition, the Federal Reserve Bank of New York has been selling complex mortgage securities from its portfolio of troubled assets acquired in AIG's bailout.

The overall rescue of the financial system hasn't been as costly to taxpayers as originally estimated. At the plan's launch, the price tag was set at $700 billion. Ultimately, $431 billion was disbursed through various rescue programs. Much of that has been recovered as the government has sold off investments or companies have paid back funds.

Last month, the Treasury estimated that the 2008 Troubled Asset Relief Program, or TARP, will ultimately cost taxpayers nearly $60 billion, down from the previous estimate of $68 billion.