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Business

AIG still owes over $120 billion in taxpayer aid

©

Text by NEWS WIRES

Latest update : 2009-09-21

Beleaguered insurance giant AIG, bailed out by the US government last year, still needs to repay nearly 121 billion dollars in taxpayer aid, according to an official report published on Monday by the US Government Accountability Office.

AFP - US insurance giant AIG, partly nationalized a year ago to avert a collapse authorities said would destabilize the global financial system, needs to repay nearly 121 billion dollars in taxpayer aid, an official report said Monday.

The Government Accountability Office, an investigative arm of Congress, said the ultimate success of AIG’s restructuring and repayment efforts remains uncertain," in a report on the 700-billion-dollar Troubled Asset Relief Program.

The GAO said that American International Group, which received by far the biggest federal bailout, had shown some progress in its ability to repay the federal assistance.

But that "improvement in the stability of AIG’s business depends on the long-term health of the company, market conditions, and continued government support," the report said.

AIG was on the brink of bankruptcy in September 2008 when the government offered a financial lifeline in exchange for an 80 percent stake in the company, deeming the insurer, deeply intertwined in the global market, too big to be allowed to fail.

The company was in trouble after backing trillions of dollars in risky financial products amid a US home mortgage meltdown that triggered a global financial crisis.

The AIG bailout was the biggest in a series of government rescues launched to battle a global financial meltdown.

"To address systemic risk that could result if AIG were to fail, the Federal Reserve and Treasury made over 182 billion dollars available to assist AIG between September 2008 and April 2009. As of September 2, 2009, AIG’s outstanding balance of assistance was 120.7 billion dollars," the GAO said.

The Fed and the Treasury routinely monitor AIG's operations and follow the company's restructuring, which has included the sale of assets to raise cash.

"While these efforts are being made, the government remains exposed to risks, including credit risk and investment risk, which could result in the Federal Reserve and Treasury not being repaid in full," the GAO said.

The congressional watchdog said it would continue to review and report on the monitoring efforts of the central bank and the Treasury "to determine the likelihood of AIG repaying the government’s assistance in full and the government recouping its investment."

Date created : 2009-09-21

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