Image by Barrybar via Flickr
American International Group, which needed a sweeping rescue package from the U.S. government to stay afloat in 2008, took another step toward paying back American taxpayers this week. The insurer paid the Treasury Department $972 million as it reduces the amount of money it owes on programs created to keep the firm in business.
"We continue to make steady progress toward our goal of America's taxpayers recouping their entire investment in AIG," said Chief Executive Robert Benmosche. "I am confident that AIG's employees will continue to work hard so we can achieve this goal."
Wednesday's payment went toward reducing the liquidation preference on a special purpose vehicle created as part of the government's aid to AIG. The funds for the payment came were released from escrow tied to AIG's sale of American Life Insurance Company (known as Alico) to MetLife last year. The remaining liquidation preference the Treasury holds in AIA Aurora (the SPV), one of the stakes in AIG's businesses the government received in return for rescue funds, is cut to $8.4 billion by the $972 million payment.
The latest installment marks the sixth time AIG has returned funds to the government this year, totaling $45 billion. The AIA SPV originated on December 1, 2009, when it reduced the balance outstanding and credit line available under the initial $85 billion Federal Reserve Bank of New York facility set up in 208 to save AIG. (See "AIG's Repayment Plan: Rob Peter, Pay Paul.")
The Treasury Department acknowledged AIG's latest repayment in a statement Wednesday, and provided a breakdown of how close the ties remain between the insurer and the government:
After today’s repayment, the U.S. Government’s remaining outstanding investment in AIG through Treasury, including common and preferred interests, is $50 billion. In addition, the Federal Reserve Bank of New York has loans to Maiden Lane II and III of $17.5 billion, including principal and accrued interest outstanding. These Federal Reserve Bank of New York loans are collateralized by assets with a current value of approximately $30.7 billion, well in excess of the outstanding loan balances.Overall, Treasury has received $317 billion in repayments and other income from its TARP investments – nearly 77 percent of the $413 billion disbursed under the program to date.
Shares of AIG surged Wednesday alongside a broader market rally, adding 4.4%.