AIG Retires One Part of its TARP Debt

AIG, originally considered to be the TARP recipient least likely to succeed, has sent taxpayers another significant installment on its debt.  The Department of the Treasury announced on Thursday that it had received an additional $1.5 billion from AIG.  This pays in full Treasury's preferred equity investment in AIG, more than one year ahead of schedule. 

AIG received a total of approximately $182 billion from Treasury and the Federal Reserve Bank of New York (FRBNY) in 2008 as it faced collapse in the wake of the Lehman Brothers bankruptcy and the freezing of credit markets.  With the recent payment the government still has an outstanding investment in AIG of $45 billion consisting of $35.7 billion owed to Treasury and secured by 1.248 billion shares of AIG common stock and a Federal Reserve Bank of New York loan to Maiden Lane III, an AIG holding, of $9 billion.  The Treasury holdings constitute 70 percent of the outstanding common stock of AIG and the Maiden Lane loan is collateralized by assets with a current value well in excess of the outstanding loan value.

This month along Treasury has recouped more than $14.6 billion on its emergency investment in AIG.  It sold $6 billion in AIG common stock and received an earlier payment of $8.6 billion on the preferred equity interests.

 "In the dark days of the financial crisis, when commitments to AIG totaled $182 billion, few would have believed that we'd already be able to reduce that amount by more than 75 percent, or that we may be able to recover every single dollar invested in the company," said Assistant Secretary for Financial Stability Tim Massad. "This demonstrates the significant progress that AIG and the government have made in restructuring the company's business so that it can repay taxpayers."

Treasury continues to wind down TARP, the Troubled Asset Relief Program.  More than 80 percent ($333 billion) of the $414 billion funds disbursed for TARP have already been recovered to date through repayments and other income.