GAO: U.S. Could Make Over $15B from AIG Investment

NU ONLINE NEWS SERVICE, MAY 7, 2:45 P.M. EDT

WASHINGTON—The U.S. government's fiscal watchdog said today the federal government could ultimately make more than $15 billion from its investment in American International Group, an investment the government said was necessary to save AIG from insolvency.

The investments were made starting Sept. 16, 2008.

The report by the Government Accountability Office was based on events up to March 22—before the government finished selling off at a profit its total investment in the Maiden Lane II facility and its most speculative assets in Maiden Lane III.

The report included the repayment of the Federal Reserve Bank of New York loan to AIG through the Maiden Lane facility, as well as repayments through sale of AIA Aurora LLC, another special purpose facility, and sales as of March of Treasury's common stock in AIG.

"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 report says.

The GAO says this analysis is primarily based on repayments and recoveries and market valuation of AIG's stock and does not include estimates of subsidy costs associated with the assistance.

"The actual repayment of the remaining assistance continues to depend on AIG's long-term health, the timing of Treasury's sale and the share price of AIG stock, among other things," the GAO report notes.

"As Treasury arranges to sell its stock in AIG to exit the company, several indicators suggest that the most likely buyers will be institutions, many of whom already have considerable holdings in other insurance companies," the GAO report says.

The report is more optimistic than the GAO's July 2011 report, which said it remained unclear whether the government would recoup its costs for bailing out the insurance giant.

According to the GAO report, as of March 22, the remaining assistance to AIG was $46.3 billion, including unpaid dividends and accrued interest.

This amount includes Treasury's $35.9 billion investment in AIG common stock and a balance of $8.3 billion owed by Maiden Lane III to the Federal Reserve Bank of New York (FRBNY).

This remaining assistance was down from $92.5 billion in March 2011 and $154.7 billion in December 2010, the report says.