Government says turning profit on AIG bailout
By AP - WASHINGTON
11th September 2012 11:31 AM
The U.S. government said Monday it will show a profit of more than $12 billion from its $182 billion bailout of AIG after selling a big chunk of its shares in the insurer.
The Treasury Department announced the sale of almost 554 million American International Group Inc. shares at $32.50 apiece, netting the government about $18 billion.
The sale reduces the government's stake in AIG to under 22 percent from about 53 percent. That puts its holdings in the insurer below a majority stake for the first time since the 2008 bailout.
It will also mean that the $182.3 billion bailout has been fully recovered, and then some. The Treasury Department said it and the Federal Reserve have recovered $194.7 billion so far.
"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," Treasury Secretary Tim Geithner said in a statement.
AIG, which is based in New York, nearly collapsed at the height of the financial crisis in 2008. As the housing market crumbled, it suffered crippling losses from exotic financial instruments based on mortgage securities.
Its bailout was the biggest of the Wall Street rescue packages.
If there is more demand for the latest stock sale, underwriters have a 30-day option to buy up to $2.7 billion more of the government's stake in AIG. If the option is fully exercised, the government's stake in AIG would drop to 16 percent.
AIG said it is buying back $5 billion worth of the stock.
Its shares closed Monday at $33.30, slipping 69 cents, or 2 percent.
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