U.S. Treasury should make $15 billion profit on AIG bailout

Linda Young – AHN News Writer

Washington, D.C., United States (AHN) – The U.S. government will likely make a $ 15.1 billion profit from bailing out insurance giant American International Group Inc., according to a congressional watchdog panel’s report.

The Government Accountability Office report came out on Monday. The GAO said the size of the profit depends on several factors. They include the long-term financial health of AIG (Fortune 500), the timing of the Treasury’s sale of the stock and AIG’s share price at the time of sale.

AIG showed signs of becoming more stable and profitable in 2011 with a net income of $ 18.5 billion, the GAO noted.

Taxpayers have an exposure through the U.S. Treasury for the government aid provided to AIG in 2008. However, that exposure has been significantly reduced from the original $ 180 billion committed to the bailout. The Treasury announced it was selling about $ 5 billion in common stock, which will bring the remaining investment down to $ 30.7 billion.

Government officials decided to bail out AIG because of its exposure to the troubled mortgage market after the housing bubble burst in 2008. AIG was deemed too big to fail

The bailout from the Treasury’s Troubled Asset Relief Program and the Federal Reserve was one of the federal government’s largest investments in a private sector institution, the GAO said.

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