£12-billion profit from AIG sale
The US government has had its patience and investment rewarded for its bailout of American International Group (AIG) in 2008, as in September it saw a profit of $12 billion after selling $18 billion worth of stock in the firm. The bailout given to AIG reached a staggering $182 billion and gave the government a majority share in the company, but following the share sale and other disposals of assets by AIG, the government now owns around 20 per cent of the insurer. The government can sell the remaining shares in the future in the hope that it will garner greater return on investment. In a statement following the share sale, the Treasury said: “Giving effect to today’s offering, Treasury and the Federal Reserve’s combined $182-billion commitment made to stabilise AIG during the financial crisis is now fully recovered.” Timothy Geithner, Treasury Secretary, added: “Taking action to stabilise 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. To stabilise 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.”
The US government has had its patience and investment rewarded for its bailout of American International Group (AIG) in 2008, as in September it saw a profit of $12 billion after selling $18 billion worth of stock in the firm. The bailout given to AIG reached a staggering $182 billion and gave the government a majority share in the company, but following the share sale and other disposals of assets by AIG, the government now owns around 20 per cent of the insurer. The government can sell the remaining shares in the future in the hope that it will garner greater return on investment. In a statement following the share sale, the Treasury said: “Giving effect to today’s offering, Treasury and the Federal Reserve’s combined $182-billion commitment made to stabilise AIG during the financial crisis is now fully recovered.” Timothy Geithner, Treasury Secretary, added: “Taking action to stabilise 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. To stabilise 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.”
The drop in ownership percentage for the Treasury has triggered a change in regulation for AIG, as once the Treasury’s ownership stake fell below 50 per cent, the insurer has to be regulated by the Federal Reserve because AIG still owns a small bank and is therefore considered to be a savings and loan firm. As a result of the rule, AIG will be required to stick to a 2010 financial reform law, the Dodd-Frank law, which places limits on the ability of large financial firms to trade for their own account or own stakes in private equity firms and hedge funds.