AIG Plots To End Taxpayer Bailout
Hand-picked by Paulson to head AIG and cheat taxpayers, former Goldman Sachs Director Ed Liddy wonders if anyone besides Code Pink is even paying attention.
Taxpayers are still waiting to receive 2-years of dividend payments from AIG.
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Insurer and Treasury Discuss Accelerating the Sale of Government's Stake
By SERENA NG And DEBORAH SOLOMON
American International Group Inc. and its government overseers are in talks to speed up an exit plan designed to repay U.S. taxpayers in full while enabling the giant insurer to regain independence, according to people familiar with the matter.
Under the plan, which could commence as early as the first half of 2011, the Treasury Department is likely to convert $49 billion in AIG preferred shares it holds into common shares, a move that could bring the government's ownership stake in AIG to above 90%, from 79.8% currently, the people familiar said. The common shares would then be gradually sold off to private investors, a move that would reduce U.S. ownership and potentially earn the government a profit if the shares rise in value.
A successful exit from AIG for the Treasury Department would take several years and is far from certain, depending on, among other things, market conditions and the company's ability to convince investors it can generate consistent profits from its core insurance businesses. Those will mainly consist of a global property and casualty insurer and a U.S. life insurance and retirement services business, which AIG hopes can together produce $6 billion to $8 billion in annual earnings.
But if it could be pulled off, an exit would be seen as a victory for the government and the company. AIG is the biggest recipient of government aid from the crisis and has been a lightning rod for critics who have questioned officials' decisions in rescuing and overseeing it.
Two years ago this week, the government rescued AIG from the brink of collapse, and more than $120 billion of taxpayer support is still outstanding, including loans from the Federal Reserve Bank of New York and $49 billion AIG received from Treasury's Troubled Asset Relief Program. Many people remain skeptical that all the money can be repaid.
Movement toward an exit strategy for Treasury, which would follow payback to the Federal Reserve, has been under way for some time but details have been scant. Analysts have widely expected the government to exchange its preferred shares in AIG into securities that can be sold to private investors, but some estimated it could take another one to three years for the process to start. Also unanswered was what the strategy would involve and how much of AIG the U.S. government would own as a result.
The Final Pieces
What is still owed to taxpayers from the AIG bailout and how the money is likely to be recouped.
$49 billion
Preferred shares held by the Treasury Department
(Likely to be converted into common shares and sold to investors over several years. Now under discussion between AIG and its government overseers)
$26 billion
Preferred interests in AIA and Alico, overseas life insurance units, held by the Federal Reserve Bank of New York
(To be repaid from sales of the two units)
$20 billion
Secured debt owed to the New York Fed
(To be repaid mainly from AIG asset sales)
$29 billion
Maiden Lane II and III, companies financed by the New York Fed that hold mortgage securities previously linked to AIG
(To be repaid from the securities the companies hold)
Sources: WSJ reporting; AIG; Federal Reserve
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Sep 14, 2010 at 2:23 AM
Reader Comments (7)
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