Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, September 11, 2012

Treasury Announces an Expected Overall Positive Return of $182 Billion on AIG Bailout

On Sept. 10 U.S. Treasury announced that it planned to sell approximately 553.8 million shares of AIG common shares at $32.50 in an underwritten public offering, for expected proceeds of $18 billion.  Today it issued another release on the forthcoming offering, announcing that it expects to receive an additional $2.7 billion from the offering because the underwriters exercised their over-allotment option, bringing the total anticipated proceeds to $20.7 billion.

After the offering, Treasury's common stock ownership in AIG would decrease from approximately 53.4% to 15.9%.  According to the release:

The overall commitment that Treasury and the Federal Reserve made to stabilize AIG during the financial crisis totaled approximately $182.3 billion. Through repayments of principal and reductions/cancellations in commitments ($178.8 billion), as well as additional income from interest, fees, and other gains ($18.6 billion), Treasury and the Federal Reserve have now recovered a combined total of $197.4 billion (giving effect to the offering) – representing a positive return of $15.1 billion to date compared to the original combined $182.3 billion commitment. Future sales of Treasury's remaining AIG common stock holdings will provide an additional return to taxpayers.

 NYTimes Dealbook's Andrew Ross Sorkin features an interview with Neil Barofsky, former TARP special inspector general, who continues to assert that Treasury will suffer significant losses from the bailout.  NYTimes, Plot Twist in the A.I.G. Bailout: It Actually Worked

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