The U.S. is ending up with a sizeable profit on its controversial bailout of one of the world's largest insurers during the worst days of the global economic downturn.
The Treasury Department said it is selling 234 million shares in American International Group (AIG) on Tuesday at a profit of $7.6 billion, bringing its overall net gain to $22.7 billion. The latest stock sale leaves the government with only a small remaining connection to the multinational company.
As AIG teetered on the brink of collapse four years ago, the government over time invested more than $182 billion in the New York-based corporation to keep its potential demise from undermining the U.S. and world economies. At one point, the U.S. owned 92 percent of the company, which had invested heavily in real estate loans that turned bad when borrowers stopped making payments.
AIG's rescue was the biggest of many companies the U.S. bailed out in 2008 and 2009 — and one of the most controversial. Numerous officials in Washington protested that taxpayers had no reason to rescue a Wall Street giant that made bad business decisions. Federal Reserve Chairman Ben Bernanke said the bailout made him “more angry” than any of the government decisions of the time.
Even after American taxpayers rescued the company, two U.S. administrations, that of George W. Bush and Barack Obama, complained about AIG's excesses, such as lavish payments for a conference at a resort and bonuses for traders.
Now, AIG has trimmed its operations — cutting its portfolio from $1 trillion to $550 billion — and is concentrating on providing property, life and retirement insurance products. The company says it has met its obligations to the government and has been profitable for four straight quarters.
AIG chief executive Robert Benmosche told employees that Tuesday's U.S. stock sale “warrants a celebration like no other in AIG's history and places well in the past a crisis none of us will ever forget.”