(NEW YORK) MintPress – The Treasury Department’s sale of all its remaining shares in American International Group (AIG) ends taxpayer ownership of the insurance company four long years after it received a $182 billion government bailout at the height of the global financial crisis.
The sale is the latest step in an effort by the government to wind down its controversial Troubled Asset Relief Program, or TARP, part of the measures implemented in 2008 to address the subprime mortgage crisis felt not only at home, but worldwide, playing a major role in the financial crisis in Europe.
The Treasury said it received $32.50 per share for its 234.2 million final shares, a 16 percent stake in the company, or $7.6 billion.
That brings, the government a total profit of $22.7 billion from the AIG bailout package, which included both loans and federal guarantees.
AIG was rescued just before it would have been forced to file for bankruptcy as losses on risky investments mounted. The government at one point owned 92 percent of the firm.
“No taxpayer should be pleased that the government had to rescue this company, but all taxpayers should be pleased with today’s announcement, ending the largest of the government’s financial industry bailouts with a profit to the Treasury Department,” said Jim Millstein, the Treasury’s former chief restructuring officer, in a statement.
Government officials overseeing the bailout acknowledged early on the difficulties in tracking the money and in measuring its effectiveness.
Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (SIGTARP), told lawmakers, “Inadequate oversight and insufficient information about what companies are doing with the money leaves the program open to fraud, including conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.”
AIG under fire
The AIG bailout was among the most contentious; for many, it represented the worst of Wall Street’s excesses.
Members of Congress were outraged that just days after receiving the bailout, AIG spent roughly $440,000 on a California retreat that included spa treatments, banquets and golfing.
The company said that the trip was a reward for top-performing life-insurance agents planned before the bailout.
In March 2009, legislators began calling for Treasury Secretary Timothy Geitner‘s resignation after it was revealed that AIG paid $165 million in bonuses to employees of the derivatives unit that was blamed for the company’s near collapse.
Sen. Charles Grassley (R-Iowa) said, “I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of two things: resign or go commit suicide.”
Sen. Jon Tester (D-Mont.) said AIG executives “need to understand that the only reason they even have a job is because of the taxpayers.” While Sen. Dick Durbin (D-Ill.) said, “The fact that they continue to do it while we pour in billions of dollars is indefensible.”
AIG initially defended the bonuses by citing contractual obligations, but by the end of the month, 9 of the 10 highest paid AIG executives had agreed to give them back.
Taking care of business
In August 2009, Robert Benmosche, the former CEO of MetLife, took over as CEO of AIG, replacing Edward Liddy, who had been installed by the government.
Benmosche figured out a way to let the company both repay the government and stay in business, and things started turning around.
He implemented a significant restructuring aimed at focusing on its core insurance operations, selling off significant assets and cutting the size of the company nearly in half.
In September, Benmosche said the company may even be in a position to consider a dividend by next summer.
In an internal memo to employees, he said the Treasury sale “marks one of the most extraordinary — and what many believed to be the most unlikely — turnarounds in American business history.
“This has been a long walk since September of 2008,” he wrote.
Still, the government is expected to continue to keep a close eye on the company. It is likely to be named as a “systemically significant financial institution,” a distinction under the 2010 Dodd Frank Wall Street financial reform that subjects large financial firms to more oversight by the Federal Reserve.
The law’s supporters say the designations are key to preventing a repeat of the 2008 crisis, but Republicans and some Democrats have argued that they provide big firms an implicit federal backing and makes them permanently “too big to fail.”
In the meantime, other companies, including General Motors, auto lender Ally Financial Inc. and a series of small banks, still owe the government.
The latest Treasury estimate has the TARP ultimately costing the U.S. taxpayers $60 billion.