Plan set to end government involvement in AIG
Friday, January 14, 2011
NEW YORK (AP) — The government will wind down its largest and most complex rescue from the 2008 financial crisis, a $182 billion package to save insurer AIG, by selling stock over the next two years. The plan could net taxpayers billions in profits.
American International Group Inc. paid its $21 billion outstanding balance to the New York branch of the Federal Reserve on Friday and converted preferred stock owned by the Treasury Department into more than 1.6 billion shares of common stock that can be sold on the open market.
The common stock gives the government a 92 percent ownership stake. The Treasury Department is expected to start selling its shares in March.
The shares were converted at a value of about $30 apiece. AIG stock closed at $54 on Friday on the New York Stock Exchange. If it holds that value over the next two years, as the government unloads its shares, taxpayers would clear about $40 billion.
“We will work to make sure that the U.S. taxpayer will get back all of its money with a healthy profit,” AIG CEO Robert Benmosche told The Associated Press in an interview.
Treasury Secretary Timothy Geithner said in a statement that the government “remains optimistic that taxpayers will get back every dollar of their investment in AIG.”
The government came to the rescue of AIG in September 2008, at the depths of the financial meltdown. It did business with hundreds of firms around the world, and officials feared its collapse would wreck the financial system.
AIG became a symbol for excessive risk on Wall Street and a touchstone of public anger. It was criticized by some members of Congress for spending $440,000 on spa treatments for executives only days after it was bailed out.
The bailout, which included loans and federal guarantees, was the largest of a series of rescues announced during the stomach-churning weeks of the financial crisis in the fall of 2008.
More like this story
Use the comment form below to begin a discussion about this content.
Please review our Policies and Procedures before registering or commenting