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AIG and government agree TARP exit plan

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Daylife/Reuters pictures used by permission

The American International Group has reached an agreement in principle to repay the Federal Reserve Bank of New York for the company’s 2008 rescue, and to gradually return the ownership of its stock to the public markets.

Robert Benmosche, chief executive of A.I.G., said the plan would allow the company to “remain on track to emerge with one of the largest, most diversified property and casualty companies in the world.”

The company and its rescuers in the federal government have been working intently in recent weeks to complete such a plan before the expiration of the Treasury’s Troubled Asset Relief Program on Oct. 3, and before the Fed’s bailout loan came due. The original terms called for A.I.G. to pay back the Fed within two years.

Under the plan, the Treasury Department will, for a time, own 92.1 percent of A.I.G. before it begins to sell its shares…

The company said it would use its own resources to pay back the $20 billion in loans, including the proceeds it expects to receive from the sale of a big overseas life insurance unit to MetLife. That sale, announced in March, should yield $6.8 billion in cash and $8.7 billion in MetLife stock, and close by the end of the year.

Still more money to repay the Fed is expected to come from an initial public offering of a second big foreign life insurance business on the Hong Kong exchange. The offering was delayed for several months while A.I.G. tried unsuccessfully to sell the unit to a British company, but A.I.G. now says the Hong Kong offering is back on. It did not provide a time frame.

In addition, the Treasury has agreed to help the Fed sever its ties with A.I.G., by providing the means for the company to redeem most of the Fed’s $26 billion in preferred interests. That money will come from the unused portion of an emergency assistance package that the Treasury made available to A.I.G. as its troubles reached a peak in early 2009…

Taking all of those steps will end the Fed’s role as a lender to A.I.G. and an investor in the company, a role that has never fit in well with the Fed’s duties as a central bank. The Treasury will come out of the transaction with a larger preferred stake in A.I.G., but expects the company to keep taking steps to pay it down, according to the new agreement in principle.

The range of fools, from hypocrites and sophists in the Republican Party to the just-plain-ignorant tea baggers who persist in whining about TARP confound reason. Whether your concern is history or economics, the truth remains self-evident. Not only did the TARP program keep a significant chunk of our economy from collapsing in the wake of the meltdown resulting from a decade or more of Free Market corruption, our Treasury and taxpayers continue to realize a profit from the payback.

It ain’t all over. But, the process is advanced enough that even the political losers and their obedient grunts should consider climbing on board and joining the move towards the future – instead of trying to turn back both time and progress.

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Written by Ed Campbell

September 30, 2010 at 3:00 pm

One Response

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  1. You’re not only talking about the Party of NO, the whole Klan taken together says, NO WAY. They would rather the economy had been allowed to fail – even as the result of neocon corruption. They would return to the battle with the same lies, the same ideology, the same foolishness that they return to since the days of Hoover.

    They still cannot reconcile the success of FDR and the essentials of Keynes even though the rest of the world learned those lessons. Add to that Leontiev’s simplest macro-economics a la Alan Greenspan as naive as he was about corporate honesty – and at least we have a chance of staying in the wake of China, Germany and more.

    Listen to the priests of Nay, just settle down and watch the ship sink, folks.

    moss

    September 30, 2010 at 3:16 pm


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