The AIG bailout is moving closer to becoming a success story. The company was effectively nationalized as a result of the 2008 financial crisis.
But through a series of selloffs, the government has gradually reduced its ownership stake. The next sale to the public of about $18 billion worth of AIG shares will make the US a minority shareholder for the first time since the crisis.
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Four years ago, US officials deemed AIG too big to fail—that it was too intertwined with the fates of too many other companies to be allowed to go the way of Lehman Brothers.
The decision to bail out AIG was a controversial one and its success is a milestone for the current administration as well as a sign of how much the markets have recovered since the crisis.
It is also further testament to the success of the Fed’s plan to reduce interest rates to support a struggling economy.
The sale of AIG may also renew calls for the Treasury to outline similar plans to exit other financial companies in which it took a hefty stake, such as Fannie Mae and Freddie Mac.
Those investments are still in the red.
It could be said that timing on the AIG sale is designed to boost re-election of the current administration. The Treasury says it is simply the next step in winding down
the Troubled Asset Relief Program, otherwise known as TARP.
The fact is, this will be the fifth public sale of AIG shares since May of 2011. And almost anything done between now and the election can be viewed as an attempt to gain favor for the administration.
AIG has been a heavy chain around the government’s---a.k.a. taxpayers—since the fall of Lehman Brothers during the crisis. The upcoming sale will cut the US Treasury stake in AIG from 53% to approximately 23%.