Ideologues will never admit it, but TARP appears an effective intervention in failed capital markets. The economy could be worse, according to supporters.
The U.S. Department of the Treasury today announced that it had received an additional repayment from American International Group (AIG) of $2.15 billion funded by the proceeds from the previously announced sale of AIG’s Nan Shan life insurance subsidiary. The proceeds were used to pay back the U.S. taxpayers’ investment in AIG through the redemption of an equal portion of Treasury’s preferred equity interests in AIA Aurora LLC, a subsidiary of AIG.
Overall, Treasury said it has received $313 billion in repayments and other income from its TARP bailouts – more than 76% of the $412 billion disbursed under the program to date. Critics call it socialism for the rich.
During the financial crisis and Great Recession caused by Wall Street financiers, the U.S. Government’s support for AIG totaled approximately $180 billion. After today’s repayment, the taxpayers remaining outstanding investment in AIG through Treasury is $51 billion.
Not one of the involved executives has been prosecuted for what were various forms of financial fraud that lead up to the near collapse of the global financial system and the ongoing Great Recession.
In addition, the Federal Reserve Bank of New York – once the home field of current Treasury Secretary Geithner has loans to holding companies called Maiden Lane II and III ($18.8 billion, including principal and accrued interest outstanding). These Federal Reserve Bank of New York loans are collateralized by assets with value well in excess of the outstanding loan balances ($31.7 billion), Treasury claims.
In January 2011, AIG completed a recapitalization which resulted in AIG repaying all the outstanding loans provided by the Federal Reserve Bank of New York. Also at that time, Treasury received 1.655 billion shares of AIG common stock (~92% of AIG’s outstanding common stock) and $20.4 billion in preferred equity interests in AIG. Treasury has now sold 200 million shares of AIG for proceeds of $5.8 billion and AIG has made payments to Treasury, including the repayment announced today, of $11.4 billion on the preferred equity interests.
“This is another important milestone in AIG’s remarkable turnaround,” said Assistant Secretary for Financial Stability Tim Massad. “We continue to make progress in recovering the taxpayers’ investments in AIG.”
