Bailed-out insurer AIG announced a deal Thursday that it said would allow it to repay taxpayers.
Under the complicated arrangement, Treasury will temporarily own 92.1 percent of the insurer, which said it would begin repaying $46 billion owed to the Federal Reserve Bank of New York.
{mosads}Treasury will own 1.65 billion in AIG stock, which it will eventually attempt to sell on the open market.
Treasury Secretary Timothy Geithner hailed the arrangement, saying it would speech up AIG’s repayment and put taxpayers in a stronger position.
“The exit strategy announced today dramatically accelerates the timeline for AIG’s repayment and puts taxpayers in a considerably stronger position to recoup our investment in the company,” he said in prepared remarks. “While there is a lot of work ahead to execute the terms of this agreement, today we are much closer to seeing a clear path out.”
The bailout of AIG and banks after the 2008 financial crisis has been a political albatross for politicians in both parties. Lawmakers have generally been running away from the vote ahead of November’s elections.
While the TARP is now expected by many to deliver a profit to taxpayers, AIG has long been seen as a losing investment. But Geithner on Thursday offered optimism that the new deal could help taxpayers get their return.
“AIG’s Board of Directors and new management team deserve credit for the substantial progress they’ve made to lower the company’s risk profile, refocus it around core insurance businesses, and put it in a better position to pay back taxpayers,” Geithner said.
AIG executives said the terms of the deal would help their company and taxpayers.
“This is a pivotal milestone as we deliver on our long-standing promise to repay taxpayers and we thank the American people for their support,” said Robert Benmosche, the company’s president and CEO.
He said the deal would simplify government support for AIG and set a clear path forward for repayment.
AIG is selling its Asian life insurance business and its foreign life insurance business to pay back some of the money owed to the Federal Reserve Bank of New York. It is also drawing down $22 billion in funds available to it under the Troubled Asset Relief Program to pay off the New York Fed. It said it believed proceeds from the insurance company transactions would help it pay back Treasury.
Treasury will try to sell its shares of AIG stock over time to win back its investment, something it is now trying to do with its TARP investment in Citibank.
This story was first posted at 9:25 and updated at 12:58.
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