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Entries in AIG (6)

Tuesday
Jan082013

AIG May Join Suit over US Bailout

STAN HONDA/AFP/Getty Images(NEW YORK) -- The giant insurance company AIG, which was saved from collapse by a $182 billion taxpayer-funded bailout, is reportedly considering joining a lawsuit against the government.

According to The New York Times, the complaint claims shareholders were cheated by the terms of the bailout, which included high interest rates and billions in payments to AIG's Wall Street clients.

The newspaper reports the lawsuit was filed in 2011 by 87-year-old former boss Maurice Greenberg, a major investor who ran AIG for more than four decades. 

The lawsuit claims the terms of rescue were too harsh, and that shareholders were deprived of tens of billions of dollars, which violated the Fifth Amendment prohibiting seizure of private property for “public use, without just compensation."

According to The Times, AIG board members will meet on Wednesday in New York to hear a presentation about joining the shareholder suit.

Copyright 2013 ABC News Radio

Friday
Aug242012

AIG Bailout Leads to $17.7 Billion Government Profit After TARP

STAN HONDA/AFP/Getty Images(NEW YORK) -- The federal government has sold off the remainder of its AIG securities for a surprise $17.7 billion profit, the latest piece of the controversial TARP government bailout to make a profit.

The AIG profit, announced by the Federal Reserve Bank of New York on Thursday, came as the Republicans have made the expensive federal bailout a campaign issue.

The black ink surrounding the American International Group was a surprise because analysts had initially thought that much of the government's AIG investment would never be recovered.

The New York Fed said it has sold the remainder of the AIG securities for a net profit of $17.7 billion, including $8.2 billion in interest and fees.

"We've made significant progress winding down TARP's investment programs and recovering taxpayer dollars," said Treasury spokesman Matt Anderson.

The government initiated a multi-stage rescue of AIG through both the Federal Reserve and Treasury, which committed $112 billion and $720 billion to total TARP funds, respectively.

The Treasury still has $24.2 billion left in its principal investment in AIG that is outstanding. That is backed by 871 million shares of common stock, worth around $30 billion depending on market conditions.

Despite the good news about AIG, the Treasury still estimates the total loss from TARP is $63.5 billion, most of which is committed to housing programs.

In comparison, the government has taken a hit so far with its auto rescue and the Treasury said it expects a $25 billion loss when it completes its exit from the car companies.

TARP invested $80 billion in General Motors, Chrysler and GMAC, now known as Ally. To date, the government has recovered about half, or $41 billion, from the auto companies. The Obama administration also estimates that it saved one million jobs in 2009 by saving the auto companies from collapse.

The government is still winding down other programs as part of TARP, including its investment in about 700 banks of all sizes. To date, the Treasury has made a profit of $21 billion from its investment of $245 billion.

The Treasury also estimates a profit of $3 to $4 billion in its credit market programs.

There's at least one other area of TARP from which the government never expects to recover funds, the $46 billion foreclosure prevention programs that offered aid to homeowners.

Copyright 2012 ABC News Radio

Thursday
May102012

FDIC Seeks to End ‘Too Big to Fail’ Bailouts

STAN HONDA/AFP/Getty Images(WASHINGTON) -- The U.S. government has launched a plan to deal with large failed companies that could touch off another Lehman-like disaster, hoping to prevent instability in the financial markets.

The Federal Deposit Insurance Corporation’s (FDIC) acting chairman Martin Gruenberg on Thursday outlined steps that the federal financial agency will take to allow the subsidiaries of a failed financial institution to operate while taking over a parent company -- without a taxpayer bailout in accordance with the Dodd-Frank Act.

In the event of a failing or failed institution, Gruenberg said the FDIC’s resolution strategy has three key goals.

“The first is financial stability, ensuring that the failure of the firm does not place the financial system itself at risk,” Gruenberg said in his prepared remarks in Chicago at the Federal Reserve Bank of Chicago’s Bank Structure Conference. “The second is accountability, ensuring that the investors in the failed firm bear the firm’s losses.”

James Chessen, chief economist with the American Bankers Association, said Gruenberg and the FDIC sent an “important” message to investors that there is an agency prepared to deal with a troubled, systemically important institution so disruptions will be minimal but investors will take losses.

“I think it’s clearly a message that says that if you’re expecting the government to protect your investment in a large financial firm, you should readjust your thinking,” Chessen said. “The plan is not to protect you and you should take care in really analyzing the risk of your investment.”

The third goal of the FDIC’s strategy is “viability” by converting the failed firm through a “receivership process,” similar to the manner in which the FDIC converts a failed, federally insured depository institution to another working bank.

The FDIC’s new strategy deals directly with these large financial companies, or “systematically important financial institutions” (SIFI), which critics describe as “too big to fail.” Those include a number of the rescued companies during the recent recession, like American International Group Inc. The U.S. government rescued AIG in 2008 with $125 billion in taxpayer money, and this week the Government Accountability Office released an estimate that the government could make a profit of $15.1 billion from the bailout.

The Group of 20′s enforcement agency, the Financial Services Board, published a list of about 30 SIFIs in November, which include eight American companies. Those banks face a number of requirements, including submitting a plan by the end of 2012 detailing how their businesses should be spun off if they collapse.

“By definition, these are institutions whose failure could, if not handled effectively, have ripple effects in the economy,” Chessen said. "The goal is to understand how you would resolve that.”

Copyright 2012 ABC News Radio

Monday
May072012

US Will Unload More AIG Shares

STAN HONDA/AFP/Getty Images(WASHINGTON) -- The U.S. government said Monday that it will sell $5 billion in AIG shares, one of a series of offerings since the insurance giant received the biggest bailout in history.

The Government Accounting Office said as of March 22, the government still had a $46.3 billion stake in AIG, including unpaid dividends and accrued interest. That’s down from $92.5 billion in March 2011 and $154.7 billion in December 2010. In all, the taxpayers’ ownership in AIG has been cut to 70 percent and this latest sale will bring it to 63 percent.

“Based on the $30.83 closing share price of AIG common stock on March 30, 2012, Treasury could recoup the total value of assistance extended to AIG and take in an additional $2.7 billion including dividends,” the GAO said.

However, it’s not clear how the government could take such a large amount from the insurer any time soon without damaging the value of the shares. The stock fell as much as 7 percent Monday after the government announced the new share sale.

In 2011, AIG had profit of $18.5 billion, but that was mainly because of an income tax benefit. In other words, AIG made a profit because it didn’t have to pony up taxes to the Treasury.

“The indicator on AIG’s quarterly insurance operating performance shows that AIG was profitable in most quarters and that investment income contributed considerably to that profitability, including several quarters when insurance underwriting by itself was not profitable,” the GAO said. “The sustainability of any positive trends in AIG’s operations will depend on how well it manages its business in the current economic environment.”

AIG bought and guaranteed billions of dollars' worth of mortgages that turned sour in the 2008 financial meltdown. The U.S. acted to bail out the firm after top officials said the entire financial system might collapse if no action was taken.

Copyright 2012 ABC News Radio

Thursday
Mar082012

US Government Sells $6B in AIG Shares

STAN HONDA/AFP/Getty Images(WASHINGTON) -- The U.S. government will further cut its stake in American International Group Inc. after its bailout more than three years ago, getting back a slice of the $182 billion in taxpayer money injected into what was once the world’s largest insurer.

The Treasury Department launched a sale of AIG stock Thursday, expecting about $6 billion for almost 207 million shares at $29 a share.  AIG made losing bets on mortgage-backed securities at the height of the financial crisis, wiping out the company.

New York-based AIG is buying about $3 billion of the shares, expecting steady future profits. The company agreed to buy over 103 million shares at $29 a share, or 23 cents more than the government’s break-even price of $28.72.  The government’s move will reduce its ownership in the firm from 77 percent to about 70 percent.

“We’re continuing to move forward to wind down TARP and exit our stakes in private companies as soon as practicable,” assistant Treasury Secretary for Financial Stability, Tim Massad, said in a statement. “Today is another important step in our efforts to recover the taxpayer’s investment in AIG.”

In 2008, the government initiated a record bailout package of more than $182 billion during the financial crisis. Congress authorized the $700 billion Troubled Asset Relief Program, or TARP, in October 2008 to provide relief to AIG, banks and auto companies.

The Treasury first began selling AIG stock in May 2011, in its effort to exit from ownership of the company.

The stock offering priced on Thursday and an agreement to fully repay Treasury’s preferred equity interest on Wednesday are expected to provide at least $14.5 billion in proceeds toward repaying the taxpayers’ investment in AIG, therefore reducing the Treasury’s remaining investment in AIG to $37.8 billion.

Copyright 2012 ABC News Radio

Thursday
Aug182011

AIG Continues to Pay Down TARP Debt

Adam Gault/Thinkstock(WASHINGTON) -- The U.S. Treasury Department Thursday announced that American International Group (AIG) has taken another step to reduce its debt to American taxpayers.  AIG on Thursday submitted a $2.15 billion payment to the Treasury towards a debt that once totaled $180 billion during the country's financial crisis.  Today, AIG's outstanding balance totals $51 billion.

Assistant Secretary for Financial Stability Tim Massad called AIG's payment an "important milestone in [the company's] remarkable turnaround."  

"We continue to make progress in recovering the taxpayers' investment in AIG," Massad added.

Proceeds from AIG's sale of its Nan Shan life insurance subsidiary funded the payment to the Treasury.

To date, the Treasury Department says it has received more than 76 percent of the $412 billion disbursed through the government's TARP program.  Those payments total $313 billion.

Copyright 2011 ABC News Radio







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