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U.S. bailout of AIG may net an estimated $15.1-billion profit

The Government Accountability Office forecast followed the Treasury Department's decision this week to further reduce its ownership stake in the insurance giant, to 61% from 70%.

May 08, 2012|By Jim Puzzanghera, Los Angeles Times
  • The offices of American International Group Inc. in New York.
The offices of American International Group Inc. in New York. (Justin Lane / EPA )

WASHINGTON — The U.S. government could end up pocketing a $15.1-billion profit from the bailout of insurance giant American International Group Inc., according to a new estimate by the Government Accountability Office.

The report came as the Treasury Department this week continued to wind down its stake in AIG, which the government rescued from collapse in late 2008 with a multi-step infusion of $125 billion in taxpayer money to stabilize the company.

The Treasury Department said this week that it agreed to sell $5.75 billion worth of shares to reduce the government's ownership stake to 61% from 70%. The sale, which could be final as early as this week, includes about $750 million from underwriters that exercised their option to buy additional shares.

The latest sale would reduce the Treasury Department's investment in AIG to about $31 billion, with the Federal Reserve holding an additional $9 billion in complicated loans secured by some of the company's assets.

Treasury Department officials have said they hoped to recover all the bailout money given to AIG, a prospect few expected three years ago. And on Monday, the GAO reported that AIG's improved financial health has brightened the outlook on one of the most unpopular bailouts from the financial crisis.

"When all the assistance is considered, the amount the federal government ultimately takes in could exceed the total support extended to AIG by more than $15.1 billion," the government watchdog agency said.

The estimate depends on the timing of the Treasury Department's future sales of AIG stock and the share price. The GAO said the profit projection did not factor in the government's cost to subsidize AIG the last few years; that cost was not calculated.

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