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Treasury Disposes of the Last of AIG



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With the sale of $7.6 billion worth of stock, another chapter in the financial crisis comes to a close. We managed to turn a profit, too, as the Wall Street Journal reports:

The Treasury Department said it would generate $7.6 billion in proceeds from its sale of American International Group shares, as it sold nearly all its remaining holdings in the insurer it helped rescue at the height of the financial crisis.

The government said Tuesday it would sell about 234 million common shares at $32.50 each, matching the price it got when it sold an even larger slug of shares in September. AIG’s stock closed Monday at $33.36, and jumped 1.6% to $33.90 in heavy pre-market trading Tuesday.

By Treasury’s calculation, the final round of sales means the government will have a net positive return on its AIG bailout of $22.7 billion.

This step in AIG’s turnaround, which essentially closes the book on one of the most controversial bailouts of the financial crisis, seemed nearly unattainable in 2008, when the insurer’s imminent collapse sent shockwaves through the global economy. At the time, U.S. officials cobbled together a rescue package for AIG that effectively nationalized the insurer, arguing that AIG needed to survive to prevent a financial apocalypse.

The U.S. committed as much as $182 billion of aid at the peak of the bailout, and Treasury at one point owned more than 90% of the company.

AIG’s stock is actually expected to strengthen considerably after this disposition, because there remained the eventual threat of Treasury dumping its final stock onto the market. The receipts from this last sell-off, $7.6 billion, will pay for the U.S. government’s operation for . . . about 18 hours.

Lest you think the U.S. government’s portfolio is now underweight equities, Treasury still holds interests in 229 smaller banks, part of Ally (formerly GMAC, GM’s financing arm), and, of course, General Motors. That last investment still, as of last month, leaves taxpayers $24 billion in the hole; GM’s stock will have to strengthen considerably for the government not to take a significant loss on it.



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