Sale of AIG Stake Adds to U.S. Bailout Profit

by Christopher Freeburn | December 11, 2012 12:38 pm

treasury building1 Sale of AIG Stake Adds to U.S. Bailout Profit[1]

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On Tuesday, the U.S. government announced that it had sold the last of its shares in American International Group (NYSE:AIG[2]) and will turn a $22.7 billion profit on the bailout that kept the troubled insurance giant afloat during the financial crisis[3]. Investors liked the news, sending AIG shares up about 5% in Tuesday midday trading.

The government spent $182 billion saving AIG from failure in 2008 after the collapse of the mortgage-backed securities market threatened to sink the firm, which insured certain securities. The U.S. Treasury sold its remaining 16% stake in AIG for $32.50 a share generating about $7.6 billion, the Associated Press noted.

AIG was bailed out under the politically-controversial Troubled Asset Relief Program (TARP). The government has now recouped $380 billion of the $418 billion it spent to support failing banks and financial firms under TARP.

With the sale of its remaining stake in AIG, the U.S. Treasury has exceeded the amount it invested in the company by $5 billion. The Federal Reserve, which also provided tens of billions in bailout funds, indicated that it has received a $17.7 billion profit on its bailout money.

Over the 19 months, the U.S. Treasury held six public offerings of AIG shares. After the bailout, the government owned 92% of AIG common shares.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2010/12/treasury-building1.jpg
  2. AIG: http://studio-5.financialcontent.com/investplace/quote?Symbol=AIG
  3. the bailout that kept the troubled insurance giant afloat during the financial crisis: http://www.usatoday.com/story/money/business/2012/12/11/treasury-sells-aig-stake/1760625/

Source URL: http://investorplace.com/2012/12/sale-of-aig-stake-adds-to-bailout-profit-for-u-s/
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