Thursday, December 09, 2010

Treasury's Shock and Awe on AIG

According to CNN, the Treasury and Federal Reserve finalized details of the latest restructuring of the financial giant yesterday. The agreement will allow AIG to borrow funds from the Treasury to repay the federal government. This will leave the Treasury a 92% stake in the company.

    "Today's announcement is a milestone in the government's long-stated efforts to exit our investments in private companies as soon as practical while protecting taxpayers," the government said. "When all is said and done, we believe taxpayers will recover every dollar invested in AIG and stand a good chance of making a profit."

    That's a large chunk of stock, and the government – which is not exactly eager to be seen in the bailout business nowadays, what with all the associated bad press – would surely like to sell it sooner rather than later so it can advertise all the profits its so-called investments are making for taxpayers. This has worked wonders lately with two other bailed-out outfits, Citi (C) and GM (GM).

    Thus, the Wall Street Journal reports the government wants to sell a quarter of its stake -- $15 billion worth -- in a series of deals that would ideally start early in 2011.

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