AIG's Payback to Taxpayers in Doubt

Sept. 21, 2009— -- One year after the biggest corporate bailout in the country's history, a government watchdog office Monday warned that American taxpayers may not recoup the full $182 billion given to embattled insurance giant American International Group.

"AIG's ability to restructure its business and repay the government is unclear at this time," the Government Accountability Office said in a new report released Monday.

As of the start of September, the company's outstanding balance of taxpayer aid was $120 billion.

It was a year ago this month that AIG received the first chunk of a government bailout that has since grown to $182 billion. The federal money, noted the GAO, has since helped stabilize the insurance giant, which this year posted a $1.8 billion second-quarter profit, its first profit since 2007.

However, the GAO said that the company still relies heavily on government help as its source of liquidity and capital.

"The sustainability of any positive trends of AIG's operations and repayment efforts is not yet clear," the report said. "The government's ability to recoup the federal assistance money depends on the long-term health of AIG, its sales of certain businesses, and the maturation or sale of assets in the Maiden Lanes," -- lending facilities created by the Federal Reserve to purchase some of AIG's toxic assets -- "among other factors."

Treasury, Fed: 'Risks Remain'

Due to the degree of assistance provided to AIG, the Treasury Department and the Federal Reserve have taken steps to protect the government's interests. They have secured loans with collateral and set up various controls over company management and compensation. The GAO found, however, that despite these steps, "risks remain."

"The Federal Reserve and Treasury continue to carry significant exposure as a result of the assistance to AIG," said the report. "Until the debt is repaid and the equity interests are repurchased or sold, the Federal Reserve and Treasury remain exposed to credit and investment risks. The ongoing potential of systemic risk remains a concern until AIG is restructured and market conditions improve."

AIG: Will Insurance Giant Refund Entire Government Bailout?

Earlier this year, AIG's then-CEO Ed Liddy had said the insurance giant planned to sell businesses that make up about 65 percent of the company and employ around 70,000 people. But, noted the GAO, Treasury officials said that new CEO Robert Benmosche is "re-evaluating this plan."

The full report can be found HERE.