Treasury Gets At Least $12.4 Billion Profit On AIG Bailout

(Newsroom America) -- Treasury and the Federal Reserve have now recovered a combined total of $194.7 billion from American International Group, Inc. (AIG) common stock, representing a profit of $12.4 billion to date on the original bailout investment.

The Treasury announced on Monday that it has agreed to sell 553,846,153 shares of its AIG common stock at $32.50 per share in an underwritten public offering.

The aggregate proceeds to Treasury from the common stock offering are expected to be approximately $18.0 billion.

As part of Treasury’s offering, AIG agreed to purchase 153,846,153 shares at the public offering price of $32.50 per share – representing approximately $5.0 billion of Treasury’s expected proceeds from the sale.

Treasury has granted the underwriters a 30-day over-allotment option to purchase up to an additional 83,076,922 shares of AIG common stock.

As a result, Treasury and the Federal Reserve’s combined $182 billion commitment made to stabilize AIG during the financial crisis is now fully recovered.

Through repayments of principal and reductions/cancellations in commitments ($176.1 billion), as well as additional income from interest, fees, and other gains ($18.6 billion), Treasury and the Federal Reserve have now recovered a combined total of $194.7 billion representing a positive return of $12.4 billion to date compared to the original combined $182.3 billion commitment.

Future sales of Treasury's remaining AIG common stock holdings will provide an additional return to taxpayers, it said.

(C) Newsroom America 2012

($ in Billions)

Maximum Combined Commitment

Repayments and Cancelled/Reduced Commitments to Date

Interest/Fees/Gains to Date

Total Recovered to Date

Federal Reserve

$112.5

$112.5

$17.7

$130.2

Treasury

$69.8

$63.6

$0.9

$64.5

TOTAL

$182.3

$176.1

$18.6

$194.7

“Taking action to stabilize AIG during the financial crisis was something the government should never have had to do, but we had no better option at the time to protect the American economy from the damage that would have been caused by the company’s collapse,” said Secretary Tim Geithner. “To stabilize and then restructure the company with a very substantial positive gain for the American taxpayer is a significant accomplishment, but we need to continue the critical task of implementing Wall Street reform so that the American economy is never put in this position again.”

After giving effect to today’s offering (assuming no exercise of the underwriters’ over-allotment option), Treasury's remaining investment in AIG would consist of approximately 317.2 million shares of common stock. Treasury's percentage ownership of AIG’s outstanding shares of common stock (assuming no exercise of the underwriters’ over-allotment option) would decline from approximately 53.4 percent to 21.5 percent.