U.S. to make $15 billion profit on AIG bailout

@CNNMoney May 8, 2012: 8:37 AM ET
The government stands to make a $15.1 billion profit from the AIG bailout.

The government stands to make a $15.1 billion profit from the AIG bailout.

NEW YORK (CNNMoney) -- The U.S. government will make a $15.1 billion profit from the bailout of insurer AIG, according to a congressional watchdog panel's report.

The Government Accountability Office said Monday that the size of the profit will be determined by the long-term health of American International Group (AIG, Fortune 500), the timing of the Treasury's sale in the stock and AIG's share price.

The GAO said that AIG was showing signs in 2011 that the company was becoming "stable and profitable," with net income of $18.5 billion for the year, bolstered by income tax benefits and divested businesses.

Treasury's exposure to AIG, which received government aid beginning in 2008, has been reduced sharply from the more than $180 billion committed to the bailout. In the latest sale of AIG stock, the Treasury said Monday that it was going to sell about $5 billion worth of common stock, reducing the remaining investment to $30.7 billion.

GAO said it conducted the study because assistance to AIG from Treasury's Troubled Asset Relief Program and the Federal Reserve "represented one of the federal government's largest investments in a private-sector institution."

AIG was bailed out because of its exposure to the faltering mortgage market during the recent housing meltdown.

In a recent lecture at The George Washington University in Washington, Federal Reserve Chairman Ben Bernanke described the bailout of AIG as "distasteful" but necessary, motivated by the expectation that the insurer would eventually pay back its loans. To top of page

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