US receives $15 billion in profits over AIG’s bailout

WASHINGTON - Agence France-Presse

Businessmen walk past the AIG office in Tokyo, Japan. The AIG rescue deal finally turned a profit after the US Treasury sold off 636.9 million shares on Sept. 10. AFP photo

The U.S. government has raked in $15.1 billion in profits on its massive rescue of insurer AIG, the Treasury said in a rebuff to critics of the 2008-2009 bailout of the finance industry.

The massive AIG rescue deal, using $182 billion of taxpayer funds to save the foundering insurer, finally turned a profit after the Treasury sold off 636.9 million shares Monday to private investors and the company itself, raising $20.7 billion.

The share sale cut the Treasury’s majority shareholding in the company to 15.9 percent.

“Future sales of Treasury’s remaining AIG common stock holdings will provide an additional return to taxpayers,” the department said. AIG, once the world’s largest insurer, received the largest chunk of bailout money from the government’s Troubled Asset Relief Program (TARP) deployed to stop a meltdown in the financial system.

The bailout included both equity and loans from the Treasury and Federal Reserve aimed at shoring up AIG, which nearly collapsed after selling hundreds of billions of dollars in under-collateralized credit default swaps to banks and investment companies.

At the time it was feared that AIG’s collapse would bring down buyers of the swaps as well, sparking a chain reaction throughout the global financial system.

But the rescue was deeply controversial, with critics saying the money put into AIG simply went toward paying off AIG’s counterparties, rather than having them take losses on their AIG-related investments.
 
Critics said putting the company into bankruptcy would have been better for the economy and fairer for taxpayers.

The Treasury Department said that $353 billion of the $417 billion funds disbursed via TARP had been recovered before the newest AIG share sale.