Investment in American International Group (AIG)

Program Purpose & Overview

At the height of the financial crisis in September 2008, American International Group (AIG) was on the brink of failure. At the time, AIG was the largest provider of conventional insurance in the world. Millions depended on it for their life savings and it had a huge presence in many critical financial markets, including municipal bonds. AIG’s failure would have been devastating to global financial markets and the stability of the broader economy. Therefore, the Federal Reserve and Treasury acted to prevent AIG’s disorderly failure.

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Key Facts

  • The U.S. government acted to prevent the disorderly failure of AIG, after concluding that such a failure would have caused catastrophic damage to the financial system and the economy.
  • Treasury, the FRBNY, and AIG completed a restructuring plan for AIG that enabled the company to restore its financial condition and fully repay taxpayers.
  • In December 2012, Treasury sold its remaining 234,169,156 shares of AIG common stock in an underwritten public offering for aggregate proceeds of approximately $7.6 billion.
  • While the total amount disbursed to AIG was $67.8 billion, OFS collected $55.3 billion in repayments, sales proceeds, fees and dividends. After considering the interest expense of $2.7 billion, the net cost of AIG was $15.2 billion. Additionally, the TARP cost was offset by $17.5 billion in proceeds from the sale of additional non-TARP shares of AIG held by Treasury, resulting in a net gain for Treasury as a whole.