(Image Source:  )

 

BY JIM FLINK

ANCHOR:  LAUREN GORES


The Federal government is about to get out of the insurance business, becoming a minority owner of AIG for the first time since 2008.  The Wall Street Journal broke the story first.   Other media outlets followed. 

“The federal government plans to cut by more than half its stake in AIG.  It will sell off at least $18B worth of stock. The government expects to earn a profit on its investment.”

“There’s questions about whether politics are involved here ahead of the elections.  But I gotta tell you here, Joe.  At today’s price, they’re gonna make money.”

“And the break even point, by the way, is below where that stock is trading currently near $34 a share. The break-even for the government is 28.73.”

So that’s the good news. The government’s stake drops to near 20 percent. It makes money. A win-win, right? Well, maybe not.
The Wall Street Journal notes, this bailout, along with those at Fannie, Freddie and GM, all have left a lingering bad taste – and spawned some enduring political backlash.

“The government's extraordinary intervention in the economy helped seed the tea-party movement on the right. On the left, it helped spawn the Occupy Wall Street movement, which among other things contended the government propped up bankers but did less for struggling homeowners.”

And to the issue of the sale’s timing, and whether it is political or simply smart business, the Atlantic Wire notes, it all depends on your perspective.

“Either way, it's time for things to get real again for AIG. Now that the government no longer owns a majority stake, the company should expect to be regulated by the Federal Reserve as a savings-and-loan holding company. In other words, this time around they'll have to play by the rules.”

As noted, the full effect of bailouts has yet to be realized. GM, Fannie Mae and Freddie Mac are among the companies still largely held by the government. Pro-Publica is tracking all the bailouts.

“So you can effortlessly discover that it’s $27 billion for GM, $23 billion for AIG, $91 billion for Fannie $51 billion for Freddie and yes, the bank investments have so far returned a profit of $19 billion.”

If you want to see the full scoreboard from Pro Publica, we have a link in our transcript section.



(SOC)

#######