AIG bailout made the US $17.7 billion in profits

AIG

The AIG bailout turned out to be quite an investment, as it’s made the government about $17.7 billion so far. Photo Credit: David Shankbone/Wikimedia Commons/CC-BY-SA

It was reported recently that after all was said and done, the bailouts done by the government were likely to turn a profit. That has just been confirmed, as part of the last of the government’s stake in AIG was recently sold and made for almost $18 billion in profit from the AIG bailout.

AIG bailout turns out to be quite the stock pick

It has been said before that the American government is colluding with the financial-industrial complex for the enrichment of both. The differences between the two, aside from the letterhead on the stationery, appear to be disappearing, as the cash advance from the government in bailouts under the Temporary Asset Relief Program turned the government into investors, as those loans bought stakes in those companies.

One such bailout, and perhaps the most politically charged aside from that of General Motors, was the AIG bailout. AIG needed massive amounts of capital, which amounted to $182 billion, according to the Wall Street Journal, including $90 billion from the New York Federal Reserve alone.

However, was quite the investment, as a large chunk of the stake in AIG was just sold, resulting in $17.7 billion of profits made from AIG so far.

Still some on the books

The government sold off the last of its securities acquired under the TARP program, which yielded the profits. The securities in question were the last remaining “toxic assets” that were acquired in the AIG bailout, part of a portfolio of investments known as “Maiden Lane III.”

Maiden Lane III included a number of securities, including, according to Fox Business, the subprime mortgages that were a large part of the housing and financial meltdown of several years ago. In total, that portfolio made a $6.6 billion in profits for the government and “The Fed,” according to the Wall Street Journal.

The government still holds a 53 percent ownership stake in the company, due to the shares in common stock that were acquired in the bailout, or roughly $24.2 billion. Those 871 million shares, according to ABC, could go for $30 billion depending on conditions.

Bailouts an overall bust

Despite the political unpopularity, the federal government has, in the AIG bailout and in the TARP program in general, proven itself to be quite the equity capital firm regarding investments in Wall Street firms and banks. In those programs, according to ABC, the government has seen a return of about $21 billion in profits from $245 billion in loans, just under a 10 percent return.

However, other parts of TARP have not been successful. The Treasury Department anticipates a $25 billion loss when the shares acquired in Chrysler and General Motors have all been sold. The troubled mortgage refinance programs, which amounted to $46 billion in funding, are also thought to be a total loss. In total, it’s estimated that TARP will result in a $63.5 billion loss.

Sources

Wall Street Journal

Fox Business

ABC

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