AIG Bailout Leads to $17.7 Billion Government Profit After TARP

Aug. 24, 2012— -- The federal government has sold off the remainder of its AIG securities for a surprise $17.7 billion profit, the latest piece of the controversial TARP government bailout to make a profit.

The AIG profit, announced by the Federal Reserve Bank of New York on Thursday, came as the Republicans have made the expensive federal bailout a campaign issue.

The black ink surrounding the American International Group was a surprise because analysts had initially thought that much of the government's AIG investment would never be recovered.

The New York Fed said it has sold the remainder of the AIG securities for a net profit of $17.7 billion, including $8.2 billion in interest and fees.

"We've made significant progress winding down TARP's investment programs and recovering taxpayer dollars," said Treasury spokesman Matt Anderson.

The government initiated a multi-stage rescue of AIG through both the Federal Reserve and Treasury, which committed $112 billion and $720 billion to total TARP funds, respectively.

The Treasury still has $24.2 billion left in its principal investment in AIG that is outstanding. That is backed by 871 million shares of common stock, worth around $30 billion depending on market conditions.

Despite the good news about AIG, the Treasury still estimates the total loss from TARP is $63.5 billion, most of which is committed to housing programs.

In comparison, the government has taken a hit so far with its auto rescue and the Treasury said it expects a $25 billion loss when it completes its exit from the car companies.

TARP invested $80 billion in General Motors, Chrysler and GMAC, now known as Ally. To date, the government has recovered about half, or $41 billion, from the auto companies. The Obama administration also estimates that it saved one million jobs in 2009 by saving the auto companies from collapse.

The government is still winding down other programs as part of TARP, including its investment in about 700 banks of all sizes. To date, the Treasury has made a profit of $21 billion from its investment of $245 billion.

The Treasury also estimates a profit of $3 to $4 billion in its credit market programs.

There's at least one other area of TARP from which the government never expects to recover funds, the $46 billiion foreclosure prevention programs that offered aid to homeowners.