This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Enough Whining, AIG Deal Was a Winner: Street Whispers

NEW YORK ( TheStreet) -- Four years on, the U.S. government still owns more than half of American International Group (AIG - Get Report), and that's a good thing.

Four years after bailing out the insurer to a degree that far surpassed any of the bank beneficiaries of the Troubled Assets Relief Program, or TARP, the U.S. Treasury said on Monday that after completing a $5 billion offering of government government-held shares of AIG on Friday, the overallotment on the offering was exercised, leaving the Treasury expecting its proceeds from the offering to increase "to approximately $5.75 billion and the total number of shares sold in the offering to approximately 188.5 million."

The Treasury said that following the offering -- with AIG purchasing about $3 billion worth of the shares -- the government would be left holding roughly 53% of the company's common shares, worth about $24.2 billion.

While there are many media voices disgusted by the bailout, a "glass half full" approach shows just how far the company has come since the Treasury and the Federal Reserve forked over $182 billion to save the company in 2008.

The Treasury said that "in addition to principal repayments, which have reduced the government's remaining outstanding investment to $24.2 billion, the Federal Reserve and Treasury have also received additional income beyond that from interest, fees, and other gains. That additional income beyond principal repayments totals $14 billion, including approximately $13 billion from the Federal Reserve's investment and approximately $1 billion from Treasury's investment.

The Federal Reserve Bank of New York was repaid in full, as part of the deal that converted the Treasury's investment in AIG to common shares in January 2011.

Even though the Government's remaining stake in AIG is large by any standard, the stake represents only 13% of the total assistance provided to the insurer, and Uncle Sam's shares keep rising in value.

The government's process in completing its disengagement from AIG is a slow one, and for good reason. By selling the shares in an orderly fashion -- with AIG repurchasing most of them -- the company's shareholders are not facing the market disruption that would come if the Treasury had decided to dump huge lots of shares straight into the open market. Each time the government conducts a similar offering, the number of outstanding shares declines, thus pushing up earnings estimates and providing stronger support for the shares.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AIG $57.43 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
TSLA $206.79 0.00%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs