There’s an excellent piece in the NYTimes detailing the results of the taxpayer investment in AIG.
Here are a couple highlights.
“First, the $180 billion headline figure [widely reported as the cost of the bailout] is not the right number to consider. Today, taxpayers have extended loans through the Federal Reserve and Treasury to the tune of about $130 billion, which is still a boatload of money. However, about $30 billion — and he is rounding numbers here to make this easier — of that total include assets that are owned in large part by the Federal Reserve through its Maiden Lane funds. Those assets, which were once considered troubled at the height of the panic in September 2008, have since increased in value and are now, as Mr. Millstein contends, “money good.””
A.I.G.’s sale of Alico to MetLife will be finalized in a couple months, for $6.8 billion in cash and $8.7 billion in securities.
The planned IPO of A.I.A. will produce about $12 billion.
Another $4.2 billion comes from the sale of AIG StarLifeInsurance and AIG Edison Life Insurance, to Prudential Financial.
“A.I.G is going to pay down the Fed’s remaining $20 billion stake in two special-purpose vehicles, which hold the rest of Alico and A.I.A, he [Jim Millstein, the man in charge of unwinding our investment in AIG] explained.
That reduces the total figure owed taxpayers to just under $50 billion.
And here’s the clincher.
“Treasury will own 1.6 billion shares, or 92 percent of the company. At A.I.G.’s share price on Monday, the government’s stake would be worth about $62 billion, a $13 billion profit. That’s if, of course, shareholders do not send shares tumbling because of the dilution.
Mr. Millstein is betting that investors will be bullish on the stock once they understand the government’s plan to exit its investment over time.”
There’s no certainty here; there’s a lot of moving pieces, markets can move, conditions can change, etc. However, the net is we taxpayers are likely to be out far less than $180 billion – far less.
What does this mean for you?
We dodged a bullet – but we better make sure we don’t have to do this again, when we may not be as fortunate.
Oct
6
