Posted on 13 Apr 2010
The Wall Street Journal is reporting that the US Treasury is considering reducing its stake in American International Group (AIG) as light starts to appear at the end of the US federal bailout tunnel.
Anonymous sources told the paper that government officials are in talks about how to reduce the 80% stake in AIG. With AIG on course to repay its loan to the Federal Reserve through asset sales that will raise $51 billion AIG could be standing alone within a year, say Treasury officials.
Not only is the total government rescue of US banks and business likely to be less lengthy than originally predicted, it could also be less expensive. Last year, the Congressional Budget Office and Office of Management and Budget estimated that the overall bailout would cost more than $250 billion. According to the WSJ, Treasury Department officials have now reduced that figure to just $89 billion.
This figure includes Tarp payouts, capital injections into Fannie Mae and Freddie Mac, loan guarantees by the Federal Housing Administration and Federal Reserve mortgage-backed securities purchases and commercial-paper market support.
Last month, Reactions reported that the total authorized and outstanding government assistance on AIG's balance sheet is approximately $95bn as of December 31 2009. Of that $95 billion, roughly half is divided between what is owed to the Federal Reserve Bank of New York (FRBNY) and what is owed to the US Treasury.
Also in March, AIG withdrew an additional $2.2 billion from the Treasury Department to strengthen its property/casualty divisions.