Purchase of AIG Preferred Stock
Date:
November 10, 2008
Policy Area:
Financial Sector Policy
Economic Target:
AIG
Action Type:
Equity Purchase
Maximum Amount:
$40.00 billion
Amount Spent:
$8.78 billion
Deficit Impact:
$10.90 billion Purchase of $40 billion in newly-issued AIG preferred shares by Treasury Department under Trouble Asset Relief Program (TARP).
On 3/2/2009, the Treasury announced that it would exchange its "Series D" preferred stock for "Series E" non-cumulative perpetual preferred stock. This change is intended to improve the quality of AIG's equity and thus its overall market position.
On 1/14/2011, Treasury exchanged the $40 billion of preferred stock for an equivalent amount of common stock, equal to 925 million shares of AIG.
Notes:
Amount spent indicates credit issued as of 12/7/2012 (http://www.ustreas.gov/initiatives/eesa/transactions.shtml). Deficit impact calculated by CRFB, using CBO's practice of estimating costs on a risk-adjusted present value basis.
Deficit impact is derived from CBO's overall subsidy rate for assistance to AIG (13%), as listed in CBO's January 2010 baseline. However, in its Preliminary Analysis of the President's Budget, the CBO revised its total cost estimate for TARP up by $10 billion, stating that most of the revision comes from an updated estimate of support to AIG. Thus, the subsidy rate for AIG support is now closer to 27%.