Treasury Earns $7.6 Billion From Sale of Last Shares in A.I.G.

[Buster]

http://dealbook.nytimes.com/2012/12/...ares-in-a-i-g/

The Treasury Department said on Tuesday that it had sold its remaining stake in the American International Group, earning about $7.6 billion from the sale.

The government sold the 234.2 million shares at $32.50 each, a small discount from the closing price of $33.36 on Monday. The block of shares represented a 15.9 percent stake in the insurer.

With the latest sale, taxpayers have gained about $22.7 billion from a bailout that many predicted would prompt a staggering loss. In an effort to stabilize the global banking system, the government rescued A.I.G. just days after the failure of Lehman Brothers.

The stock sale also means that A.I.G. is a fully private enterprise once more, after the government owned as much as 92 percent of its shares. After the sale, the Treasury Department will hold only warrants to buy about 2.7 million shares of A.I.G. common stock, which will also be sold to generate a profit.

“On behalf of the 62,000 employees of A.I.G., it is my honor and privilege to thank America for giving us the opportunity to keep our promise to make America whole on its investment in A.I.G. plus a substantial profit,” Robert H. Benmosche, the insurer’s chief executive, said in a statement. “Thank you America. Let’s bring on tomorrow.”

The A.I.G. offering was managed by Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan Chase. The Treasury Department was advised by Greenhill & Company.

[AlwaysGreenAlwaysWhite]

taxpayers have gained about $22.7 billion

We have?

[Trades]

Originally Posted by AlwaysGreenAlwaysWhite

We have?

I'm sure our taxes will be lowered to reflect that.

[chiefst2000]

For all the complaints we heard the reality in the end was that the TARP enacted by Hank Paulsen under President Bush truly did get us out of a jam. I had said it here before. Read or watch Andrew Ross Sorkin's "Too Big To Fail". These guys did a great job at the time given the circumstances. George Bush and Hank Paulson both share the credit for this and really for getting us out of what could have been a much bigger debacle.

If I had an issue with anything it was the way they handled the auto companies. That was a blatant giveaway to the unions and the only (as far as I know) part of the TARP program that lost significant money.

[CraigFL]

Originally Posted by chiefst2000

For all the complaints we heard the reality in the end was that the TARP enacted by Hank Paulsen under President Bush truly did get us out of a jam. I had said it here before. Read or watch Andrew Ross Sorkin's "Too Big To Fail". These guys did a great job at the time given the circumstances. George Bush and Hank Paulson both share the credit for this and really for getting us out of what could have been a much bigger debacle.

If I had an issue with anything it was the way they handled the auto companies. That was a blatant giveaway to the unions and the only (as far as I know) part of the TARP program that lost significant money.

So you're saying this was bush's fault too?

[Axil]

Originally Posted by chiefst2000

For all the complaints we heard the reality in the end was that the TARP enacted by Hank Paulsen under President Bush truly did get us out of a jam. I had said it here before. Read or watch Andrew Ross Sorkin's "Too Big To Fail". These guys did a great job at the time given the circumstances. George Bush and Hank Paulson both share the credit for this and really for getting us out of what could have been a much bigger debacle.

If I had an issue with anything it was the way they handled the auto companies. That was a blatant giveaway to the unions and the only (as far as I know) part of the TARP program that lost significant money.

I disagree.

Just because this particular investment by the fed into a private company paid off, doesn't mean the federal government should invest in private business. I also don't believe it's the federal government's job to prevent the collapse of private markets.

[Warfish]

I'd have preferred to see these companies fail, and "suffer" the consequences of thier mismanagement.

Socialism/Welfare for Corporations is just as bad, and just as wrong, as Socialism for Individuals/Entitlements/Welfare.

Having the Federal Govt. reward it's Corporate friends with taxpayer money, thus propping them up and rewarding thei thieves who profited by it, while keeping the market totally closed for potential up-and-coming rivals, is so wrong it's astonishing.

"We stopped a recession/depression" is not a good enough reason.

Nothing was fixed, the entire system is broken, top to bottom, public to private.

And we, the taxpaying individuals, hacve borne the entire cost of it. But hey, we're ok with it, cause we might get a $200 tax cut one day! Yay!

[Axil]

Originally Posted by Warfish

I'd have preferred to see these companies fail, and "suffer" the consequences of thier mismanagement.

Socialism/Welfare for Corporations is just as bad, and just as wrong, as Socialism for Individuals/Entitlements/Welfare.

Having the Federal Govt. reward it's Corporate friends with taxpayer money, thus propping them up and rewarding thei thieves who profited by it, while keeping the market totally closed for potential up-and-coming rivals, is so wrong it's astonishing.

"We stopped a recession/depression" is not a good enough reason.

Nothing was fixed, the entire system is broken, top to bottom, public to private.

And we, the taxpaying individuals, hacve borne the entire cost of it. But hey, we're ok with it, cause we might get a $200 tax cut one day! Yay!

This.

I think it compares well to old-school forest fire management. Prior to 1988 the policy was to put out all forest fires as quickly as possible. Over time this led to the accumulation of dead wood in the forest and choked out new growth. Eventually the whole situation would become so flammable that firefighters couldn't control the blaze, and you'd have a fire on a much larger scale than you ever would've had you just let the smaller fires burn themselves out.

Like forest fires, depressions/recessions have a rejuvenating affect on the economy. Stopping or stalling them makes things worse in the end, and stifles innovation and competition.

[Warfish]

Originally Posted by Axil

Like forest fires, depressions/recessions have a rejuvenating affect on the economy. Stopping or stalling them makes things worse in the end, and stifles innovation and competition.

A brilliant way to put it.

The people who failed, should have been allowed to fail. The people who made mistakes, should have suffered the losses of those mistakes.

The people who were smart, and invested wisely, or saved to explooit opportunity in the market or in a particular field, or planned a start-up to exploit some other failures downfall, those people were (and continue to be) screwed by this Corporate Welfare Bailout.

Collectivization of private risk combines with privatization of private profits is a VERY bad way to go. It does so many bad things it's almost impossible to list them. It's completely non-free market, and non-competative. It's far closer to a State-run Communist system than a Capitalist Free Market, Risk and Responsabillity system.

[chiefst2000]

Originally Posted by Axil

I disagree.

Just because this particular investment by the fed into a private company paid off, doesn't mean the federal government should invest in private business. I also don't believe it's the federal government's job to prevent the collapse of private markets.

I'm not saying that the Federal Gov should invest in private enterprise. That is a terrible precedent. The circumstances of 2008 were unique in a way in that the banking system was in peril. The problem was a lack of liquidity at the time. The Federal Government had no problem forcing banks to take on "risky" loans as part of Clintons expansion of the Community Investment Act. When those loans blew up and a liquidity crisis arose, as a last resort the FED under Bush and Paulsen did what they had to do. In the end of the day the expenditures were successful and did not lose money. That initself is a testament to Paulsons competence in the matter. If some moron beurocrat had been at the help things could have turned out worse.

For me the crisis was caused by government overreach and attempts at social engineering. It was exacerbated by Wall Street greed. In the end both entities are partially responsible. Shareholders of AIG and C and CIT and the rest were sufficiently punished as their investments basically lost 95% of their value in the downturn. The end result was as good as could be hoped for given the circumstances.

[Axil]

Originally Posted by chiefst2000

I'm not saying that the Federal Gov should invest in private enterprise. That is a terrible precedent. The circumstances of 2008 were unique in a way in that the banking system was in peril. The problem was a lack of liquidity at the time. The Federal Government had no problem forcing banks to take on "risky" loans as part of Clintons expansion of the Community Investment Act. When those loans blew up and a liquidity crisis arose, as a last resort the FED under Bush and Paulsen did what they had to do. In the end of the day the expenditures were successful and did not lose money. That initself is a testament to Paulsons competence in the matter. If some moron beurocrat had been at the help things could have turned out worse.

For me the crisis was caused by government overreach and attempts at social engineering. It was exacerbated by Wall Street greed. In the end both entities are partially responsible. Shareholders of AIG and C and CIT and the rest were sufficiently punished as their investments basically lost 95% of their value in the downturn. The end result was as good as could be hoped for given the circumstances.

I agree with the red.

I disagree with the blue.

It's not really about "punishing" shareholders, or even the executives involved in making the bad decisions. It's about letting failed companies fail to make room in the economy. It is my contention that the best that could be hoped for was an economic cataclysm followed by a resurgent recovery.

[chiefst2000]

Originally Posted by Warfish

I'd have preferred to see these companies fail, and "suffer" the consequences of thier mismanagement.

Socialism/Welfare for Corporations is just as bad, and just as wrong, as Socialism for Individuals/Entitlements/Welfare.

Having the Federal Govt. reward it's Corporate friends with taxpayer money, thus propping them up and rewarding thei thieves who profited by it, while keeping the market totally closed for potential up-and-coming rivals, is so wrong it's astonishing.

"We stopped a recession/depression" is not a good enough reason.

Nothing was fixed, the entire system is broken, top to bottom, public to private.

And we, the taxpaying individuals, hacve borne the entire cost of it. But hey, we're ok with it, cause we might get a $200 tax cut one day! Yay!

I'm not sure we stopped a recession. Unemployment levels say we actually had a very nasty recession and I believe we are still in it. 1.5% growth against real inflation rates of 3% is actually recessionary IMO. The Government manipulates inflation data and the numbers provided by the Government are simply understated.

I believe we halted a financial meltdown and possible complete collapse of the international banking system. That is worth temporarily compromising principles of free market darwinism for. Particularly because at the heart of the meltdown was a government regulation requiring banks to take on risky loans that they otherwise would not have.

[chiefst2000]

Originally Posted by Axil

I agree with the red.

I disagree with the blue.

It's not really about "punishing" shareholders, or even the executives involved in making the bad decisions. It's about letting failed companies fail to make room in the economy. It is my contention that the best that could be hoped for was an economic cataclysm followed by a resurgent recovery.

You won't get strong disagreement from me in principle. Though I would ask about the collateral damage. What about clients of AIG or Citi or the rest that would have also been wiped out in the collateral damage of a meltdown. Did they deserve to be crushed because the bank or insurer they chose to work with got wiped out. There is so much intermingling between banks and businesses that a financial meltdown would have carried with it such collateral damage to the economy it is really impossible to quantify. Scenarios of financial collapse and the stuff they talk about on the "doomsday" shows were actually feasible.

I think your point makes sense but I would apply it to the auto sector bailout rather then the banking system. In that case the money given has been a complete loss. Those companies could have proceeded in the normal course of bankruptcy protection and sold themselves or restructured leaner and meaner. Instead we lost close to 50 Billion propping them up and the companies still have many of the same issues as before.

[southparkcpa]

Originally Posted by Warfish

I'd have preferred to see these companies fail, and "suffer" the consequences of thier mismanagement.

Socialism/Welfare for Corporations is just as bad, and just as wrong, as Socialism for Individuals/Entitlements/Welfare.

Having the Federal Govt. reward it's Corporate friends with taxpayer money, thus propping them up and rewarding thei thieves who profited by it, while keeping the market totally closed for potential up-and-coming rivals, is so wrong it's astonishing.

"We stopped a recession/depression" is not a good enough reason.

Nothing was fixed, the entire system is broken, top to bottom, public to private.

And we, the taxpaying individuals, hacve borne the entire cost of it. But hey, we're ok with it, cause we might get a $200 tax cut one day! Yay!

Agreed...except, the entire concept of TOO BIG to fail was that if AIG went under, the economy would collapse. I happen to believe that based on what I have read. They insured almost everything. Through re-insurance, they were the ultimate under writer of so much of the economy we would all be living in Hooverville.

Auto co's, banks, well, let them fail.

[Axil]

Originally Posted by chiefst2000

You won't get strong disagreement from me in principle. Though I would ask about the collateral damage. What about clients of AIG or Citi or the rest that would have also been wiped out in the collateral damage of a meltdown. Did they deserve to be crushed because the bank or insurer they chose to work with got wiped out. There is so much intermingling between banks and businesses that a financial meltdown would have carried with it such collateral damage to the economy it is really impossible to quantify. Scenarios of financial collapse and the stuff they talk about on the "doomsday" shows were actually feasible.

I wouldn't use the word "deserve" but yes, i think that money that wasn't insured by the fed (via FDIC) should've been forfeited when the entity that insured it became insolvent. You're right, there's a ton of intermingling, and interdependency. It creates vulnerability. The more devastating the disaster the existing system suffered, the more resilient towards a similar disaster the new system would be. This is a basic evolutionary principle, that which is weak dies, and the whole is made stronger.

Originally Posted by chiefst2000

I think your point makes sense but I would apply it to the auto sector bailout rather then the banking system. In that case the money given has been a complete loss. Those companies could have proceeded in the normal course of bankruptcy protection and sold themselves or restructured leaner and meaner. Instead we lost close to 50 Billion propping them up and the companies still have many of the same issues as before.

As long as the injection of federal money into private industry is an option, there will always be debate over when and where to use it. I contend that it is wrong under all circumstances, and ultimately always harmful to the economy, and less "fair" than allowing events to precede unmolested.

[JetPotato]

Great thread, guys.

Glad to see some intelligent conversation starting to return to the board. Predictably, now that the election is over, the short-term interest guys are disappearing. Thankfully.

And sorry about my short posts lately, with little real contribution. Work recently blocked the site, so now I can only post from my phone, which is a total pain in the ass and not very conducive to long, thoughtful posts. Still read you all though whenever I can. Mostly when I'm in the latrine

[Winstonbiggs]

It's the governments job to break up monopolies not bail out companies. It was the failure to break up these predatory companies that lead to this horrible result.

How many tax dollars were lost when the banking industry seized up? How many tax dollars were spent on extended unemployment benifits and putting those who's benifits expired on disability?

Anyone who thinks bailing out monopolies made the American taxpayer money is smoking crack. Lost GDP, housing values, tax revenue and increased expenditures to cushion the blow have to be taken into account when considering policy.

[MnJetFan]

Why not bailout small businesses they were hit just as a hard if not harder.
If you bailout these companies they will screw up again because Uncle Sam is the bailout man (meaning us of course)

[parafly]

Originally Posted by Winstonbiggs

It's the governments job to break up monopolies not bail out companies.

Agreed.

In my opinion, an infusion of cash from the Fed to provide short term liquidity was absolutely necessary to prevent a collapse of the financial industry and potentially our entire economy. However, what transpired afterward was an abomination.

The banks are now bigger than ever, corporate profits in the financial industry are at record levels, and the framework of the entire system is basically unchanged. In essence, it is was a bailout of epic proportions with no real consequences for those who had a major hand in causing it.

After an infusion of cash to keep the economy on its legs, the banks should have been broken up and the system reformed to eliminate the flaws that lead to the situation. It didn't happen, and we are all worse off for it.

[Warfish]

Originally Posted by southparkcpa

Agreed...except, the entire concept of TOO BIG to fail was that if AIG went under, the economy would collapse. I happen to believe that based on what I have read. They insured almost everything. Through re-insurance, they were the ultimate under writer of so much of the economy we would all be living in Hooverville.

So the answer is to support the poor management of a poorly run company with taxpayer dollars, reward those who failed, and not do anything to fundamentally change the company or process that created the problem, and simply temporarily hold off the collapse till a later date, where the collapse will inevitably be bigger and costlier? So the answer is a permanent state of Corporate Socialism for the greater good of avoiding (maybe) a big collapse that might happen (and might not, a direct corporate bailout not being the only option available)?