The Government Is Profiting from AIG's Rescue, But What About Other Bailouts?

Equities Editors Desk |

Timothy Geithner, United States Secretary of the TreasuryWith the largest sale to date of its holdings in AIG (AIG), the U.S. Treasury Department cut its stake at the once failing insurer to around 21.5 percent from 53 percent. The Treasury department owned as much as 92 percent of AIG as part of the $180 billion bailout program in 2008.



The sale of 554 million AIG stock at $32.50 per share generated proceeds of about $18 billion. The break-even point is $28.72 per share. Combined with the $18 billion profit from the Fed's asset sales from the bailout, the U.S. government has captured a $12.4 billion profit from the rescue on top of the shares it still holds. The bailout was heavily criticized for both financial and moral implications of using taxpayer money to rescue irresponsible actions by too-big-to-fail institutions. While the financial aspect is sorting its way out, the concern that a the success of the bailout could resurrect the high risk behavior that led to a necessary rescue in the first place.

2008 Bailouts Revisited

According to ProPublica.org, the government has disbursed $603.8 billion in bailout funds to multiple industries--mostly financial institutions. It has so far recovered $337.5 billion of those funds, and generated an additional $87.1 billion in revenue through interest, dividend and other loan payments. Most of the major banks such as Citigroup (C), Bank of America (BAC), Wells Fargo (WFC), JP Morgan Chase (JPM) and Goldman Sachs (GS) have repaid the government money they received, and then some, many smaller banks are still struggling.

Currently, the top four institutions with the most funds outstanding, still owe the government about $178 billion: Fannie Mae (FNMA) at $90.6 billion, Freddie Mac (FMCC) at $51.2 billion, General Motors (GM) at $27.2 billion, and Ally Financial (formerly GMAC) at $10.7 billion.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
PEGA Pegasystems Inc. 59.45 0.15 0.25 160,550 Trade
C Citigroup Inc. 73.53 0.65 0.89 15,634,587 Trade
JPM JP Morgan Chase 99.51 1.40 1.43 15,326,608 Trade
GS The Goldman Sachs Group Inc. 244.73 4.74 1.98 3,022,769 Trade
GM General Motors Company 45.61 0.26 0.57 12,203,186 Trade
BAC Bank of America Corporation 27.17 0.59 2.22 83,764,655 Trade
WFC Wells Fargo & Company 54.92 1.17 2.18 28,407,666 Trade
AIG American International Group Inc. New 64.87 -0.20 -0.31 6,871,243 Trade

Comments

Emerging Growth

Singlepoint Inc

SinglePoint Inc is a mobile technology company engaged in mobile payments, mobile giving, and mobile bidding. It operates mobile commerce and communications platform to accept mobile credit card payments.

Private Markets

Quants Inc

Quants, Inc, a California Corporation, develops, markets and operates financial technology platforms and alternative investment products offering sophisticated risk management since 2010. The Company has primarily sharpened its focus with…

Voleo

Voleo is a free download that allows you to form investment clubs with your friends, family, colleagues, classmates, teammates…basically anyone you know and trust. Invest and manage a stock portfolio…