AIG bailout that angered Bernanke to end with Treasury sale

U.S. to exit AIG stake with offering of 234 million shares

American International Group Inc.’s rescue is coming to an end more than four years after the U.S. took over the company to save the global economy in a bailout that fueled resentment against Wall Street.

The Treasury Department is selling its last 234.2 million shares of AIG in the government’s sixth offering of the insurer’s stock, the U.S. said in a statement today. The sale, which would generate about $7.8 billion at today’s closing price, will add to the government’s profit, which was $15.1 billion on the rescue as of mid-September.

The U.S. owned as much as 92 percent of AIG after saving a firm that insured 100,000 municipalities, retirement plans and companies and was a counterparty to some of the biggest banks. Federal Reserve Chairman Ben S. Bernanke has said saving AIG after it was hobbled by mortgage-related bets made him “more angry” than any other measure the government undertook to counter the deepest financial crisis since the Great Depression.

“There weren’t a lot of options, let’s face it,” Robert Willumstad, chief executive officer of AIG when the firm was rescued, said in an interview in November. “It was controversial, it was a big risk, but one would argue today that the government got its money back and a healthy profit.”

AIG has gained 44 percent this year, closing today at $33.36 a share. The stock slipped to $32.80 in extended trading at 5:36 p.m. in New York after the Treasury’s announcement.

Asset Sales

CEO Robert Benmosche, 68, has sold non-U.S. life insurers to help repay the bailout and divested a consumer lender while scaling back derivatives bets since becoming AIG’s leader in 2009. The insurer, once the world’s largest, is now focusing on global property-casualty coverage and life and retirement products in the U.S.

AIG had 57,000 employees and about $550 billion in assets as of Dec. 31, compared with 116,000 and more than $1 trillion at the end of 2007. Benmosche, the former CEO of MetLife Inc. who came out of retirement to run AIG, reached a deal this week to sell a majority stake in the insurer’s plane-leasing unit.

The rescue began on Sept. 16, 2008, the day after Lehman Brothers Holdings Inc. filed for bankruptcy. The Federal Reserve Bank of New York agreed to provide an $85 billion credit line, to expire within two years, in exchange for an equity stake of almost 80 percent.

The initial bailout failed to stabilize the company and was revised at least three times to give AIG more capital and additional time to repay. In March 2009, the insurer reported a record loss of more than $60 billion as mortgage-backed securities slumped. The same day, the Treasury boosted its support, pushing the rescue to $182.3 billion.

Page 1 of 4 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome