AIG Plan To Repay Taxpayers Could Be Finalized Wednesday

AIG and the U.S. government could finalize a plan as soon as Wednesday to allow the government to give up its ownership in the insurer, according to reports from Politico, the Wall Street Journal and, earlier this week, Bloomberg.

The outline of the apparent plan was reported earlier this month in the Wall Street Journal: The Treasury would convert its 79.8 percent stake in the company, worth about $49 billion, into common stock from preferred shares. Such a move would increase the government's stake, potentially to more than 90 percent, before it begins the process of gradually selling its shares on the open market.

According to Politico, the converted stock would be worth about $70 billion, which could spell profit for taxpayers and political victory for Democrats in advance of the midterm elections. But the insurance giant and its government counterparties -- the Treasury, the Federal Reserve and the three trustees who oversee the preferred stock -- would have to tread carefully.

As the WSJ discusses, the share price would determine the extent to which private shareholders see their ownership diluted, and the parties would have to strike a compromise to maximize value for both private shareholders and taxpayers. To prevent private shareholders from selling their stock after a government conversion, the company, whose initial government rescue package was worth about $182.3 billion and includes various types of investments, could issue warrants allowing shareholders to buy stock at a low price, the New York Times says.

Even if the parties settle on a stock conversion plan, AIG would need to repay about $19.7 billion to the Federal Reserve before the plan can be executed.

Comments

[RenoSage]

07:45 PM on 09/29/2010

AIG is just one of many companies that are repaying their loans, and with interest.
The taxpayers should be happy.

Unlike all the people who lost their retirement savings.
And the teabaggers want to privatize Social Security.

[DismayedRepub]

03:13 PM on 09/29/2010

I'm not a banker but shouldn't they have had a repayment plan before you lend them the money? Just saying.

[JackHoffman]

03:52 PM on 09/29/2010

The loan was secured by stock. This negotiation is just to determine the best way to liquidate the government's position.

[goijra]

02:52 PM on 09/29/2010

I say we raise the interest rate to 29% and inform them they are past their 30 day billing cycle.

[nofriendofrepublicans]

04:24 PM on 09/29/2010

I 2nd the motion. All in favor?

[mezcal]

01:53 PM on 09/29/2010

Unlike the media, the bankers and the politicians, the math does not lie.
Pretty sad commentary on our electorate that folks are still falling for the bs.

http://www.nakedcapitalism.com/2010/09/sorry-spectacle-of-team-obama-peace-with-honor-with-aig.html

Oh, more proposed lamp post decoration.

http://topics.nytimes.com/top/reference/timestopics/people/g/maurice_r_greenberg/index.html

[googlymoogly]

12:51 PM on 09/29/2010

My wife and I would like to know how much money we will be getting back after losing over $400k in our AIG retirement fund? Wishful thinking.... One can bet money that most of the top employees made out and the tax payer eats cake.

[JackHoffman]

03:55 PM on 09/29/2010

AIG wasn't a government run corporation when you invested in it. Buyer beware laws apply to you here unfortunately.

[Josh Derrick]

12:34 PM on 09/29/2010

How the heck does converting the US Treasury stake in AIG to common stock and selling it on the open market equate to AIG paying the US taxpayer back for the bailout? Isn't that more like AIG getting off scott free and not having to spend any money on paying the TARP money back?

[JackHoffman]

04:11 PM on 09/29/2010

What difference does it make? They are returning money they owe.

[Adastra7]

12:17 PM on 09/29/2010

"Hey Tea Party. I can't run a business. In fact the government can't do sh*t. It can however just earn a 70 billion profit after rescuing one of the of the business companies in the world though."

The profit's not 70 billion, that's the converted stock amount. I got the number wrong. Nevertheless my point still stands. The rescue...kind ended up being successful. *shrug* (not saying that that condones reckless financial behavior OR excuses the government's lack of an extensive and comprehensive plan for the middle and lower class on the ladder of the socioeconomic staircase, but I'm just giving credit where it is due)

[Papa Swamp]

10:30 AM on 09/29/2010

So they were bailed out to the tune of $182 Billion and the 'profit' paid back to taxpayers is around $70 billion (assuming a good stock price)? My little calculator says $112 Billion vanished somewhere.

[Organic-Guy]

10:52 AM on 09/29/2010

Profit means 70 billion plus the original investment. The story was written a little sloppy. They failed to add up the total for us.

[Netguru]

12:56 PM on 09/29/2010

The tax payers gave AIG a lot more than 182 billion. That was the first payment only.

[kelo]

09:34 AM on 09/29/2010

Sounds like fuzzy math to me.

[cgeorgan]

10:08 AM on 09/29/2010

Put the drink down, sober up, and re-read it in the morning.

[JackHoffman]

04:04 PM on 09/29/2010

lol