The U.S. government’s fiscal watchdog said today that 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.
Besides the facilities, backed by bonds of various of various quality, and the stock of several AIG subsidiaries that have since been sold in whole or in part, at one point the cash loans to AIG by the Treasury Department and the Federal Reserve Bank of New York were as high as $225 billion.
The report by the Government Accountability Office was based on events up to March 22.
That was before the government finished selling off at a profit in late March and into April its total investment in the Maiden Lane II facility and also sold off at a profit the next week its most speculative assets in Maiden Lane III.
At the same time, the government Sunday announced it planned to sell off 5 percent of its AIG shares, or 163.934,426 shares, at $30.50, which Treasury officials estimate would raise $5 billion.
Treasury said it would sell 65,573,770 shares at the public offering price of $30.50 per share to AIG.
The $15 billion net profit estimate by the GAO was based on AIG’s closing stock price on March 30 of $30.83.
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 said.
The GAO said 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 said.