AIG Retires One Part of its TARP Debt

by devteam March 24th, 2012 | Share

AIG, originally considered to be thernTARP recipient least likely to succeed, has sent taxpayers another significant installmentrnon its debt.  The Department of thernTreasury announced on Thursday that it had received an additional $1.5 billionrnfrom AIG.  This pays in full Treasury’srnpreferred equity investment in AIG, more than one year ahead of schedule.  </p

AIG received a total of approximatelyrn$182 billion from Treasury and the Federal Reserve Bank of New York (FRBNY) inrn2008 as it faced collapse in the wake of the Lehman Brothers bankruptcy and thernfreezing of credit markets.  With thernrecent payment the government still has an outstanding investment in AIG of $45rnbillion consisting of $35.7 billion owed to Treasury and secured by 1.248rnbillion shares of AIG common stock and a Federal Reserve Bank of New York loanrnto Maiden Lane III, an AIG holding, of $9 billion.  The Treasury holdings constitute 70 percentrnof the outstanding common stock of AIG and the Maiden Lane loan is collateralizedrnby assets with a current value well in excess of the outstanding loan value.</p

This month along Treasury has recoupedrnmore than $14.6 billion on its emergency investment in AIG.  It sold $6 billion in AIG common stock andrnreceived an earlier payment of $8.6 billion on the preferred equity interests.</p

 “In the dark days of the financial crisis,rnwhen commitments to AIG totaled $182 billion, few would have believed that we’drnalready be able to reduce that amount by more than 75 percent, or that we mayrnbe able to recover every single dollar invested in the company,” said AssistantrnSecretary for Financial Stability Tim Massad. “This demonstrates thernsignificant progress that AIG and the government have made in restructuring therncompany’s business so that it can repay taxpayers.”</p

Treasury continues to wind downrnTARP, the Troubled Asset Relief Program.  More than 80 percent ($333 billion) of thern$414 billion funds disbursed for TARP have already been recovered to daternthrough repayments and other income.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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