Stimulus.org - AIG

AIG Investment Program

Jason Peuquet — Tue, 03 Nov 2009 21:59:38 +0000

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

70000000000

Amount Spent:

16320000000

Deficit Impact:

22000000000

In September 2008, the Federal Reserve and the Treasury determined that an AIG default could have placed enormous financial pressures and losses on AIGs creditors and counterparties, triggered disruptions in commercial paper markets, raised borrowing costs, and could have diminished the availability of credit, all undermining business and investor confidence.

Despite the Federal Reserve’s initial moves to shore up AIG through the $60 billion line of credit and a $37.8 billion loan, AIG’s condition continued to decline. The Treasury joined the Federal Reserve in its efforts to assist AIG on November 10, 2008, purchasing $40 billion in preferred equity shares to allow AIG to obtain new capital without adding any additional leverage, all in an effort to improve AIGs credit rating. Again in March 2009, the Treasury deemed AIG to be in need of further assistance given continued market declines and the difficulty AIG had experienced in finding potential buyers for various units, under the government’s divestiture plan. The Treasury provided AIG with a $30 billion Equity Capital Facility in exchange for 300,000 shared of Series F preferred stock. The U.S. government now has roughly an 80 percent ownership stake in AIG. As of June 30, 2009, AIG had roughly $830 billion in assets.

On 1/14/2011, Treasury made several moves in accordance with its AIG exit plan. AIG repaid the FRBNY credit facility and Treasury converted some of its assets to common stock (while receiving additional stock). These moves left Treasury with about 1.65 billion shares of AIG, giving it 92 percent ownership of the company. Treasury will now sell off these shares as they see fit.

On May 24, 2011, Treasury sold 200 million shares of common stock for $5.8 billion in proceeds. This move reduced Treasury's share of AIG common stock from 92 percent to 77 percent.

The program was originally titled "Systemically Important and Failing Institutions," but has since been renamed "American International Group Investment Program."

Source:

Government Accountability Office Report on AIG, Septmber 2009

January 14 Treasury Release

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. Maximum amount specified in Treasury term sheet.

Deficit impact is CBO's estimate of the total cost of the AIG program as last stated in the November 2010 Report on TARP.

Is not a top-level node

Fed Line of Credit to AIG

Maya MacGuineas — Fri, 10 Jul 2009 19:39:11 +0000

Fed Line of Credit to AIG

Date:

September 16, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Loans

Maximum Amount:

60000000000

Amount Spent:

The Fed originally created a credit-lending facility from which AIG was allowed to draw up to $85 billion. After a $40 billion loan from TARP funds, the Fed's line of credit was reduced to $60 billion.

On 3/2/2009, the Federal Reserve and Treasury announced another major restructuring of its support for AIG. The Fed's existing $60 billion dollar credit facility will be reduced to a minimum value of $25 billion and supplemented by several other forms of support:

The Fed will provide up to $26 billion in financing in exchange for preferred interest in a special purpose vehicle that was created to hold the common stock of two AIG life insurance subsidiary companies, the American Life Insurance Company and the American International Assurance Company.

Additionally, the Fed will provide new loans worth up to $8.5 billion dollars to a special purpose vehicle of AIG's life insurance subsidiaries, which would repay the loans from income generated by its existing life insurance policies.

Altogether, the Fed's actions should still achieve a total value of approximately $60 billion (minimum of $25 billion in revolving credit facility, $26 billion for in preferred interests in SPV, and $8.5 billion in new loans). The level of Fed funds currently committed through these channels is unknown.

On 1/14/2011, Treasury announced that the AIG recapitalization plan had been completed, meaning that the line of credit to AIG had been fully repaid.

Source:

Federal Reserve 3/2/2009 Release

Federal Reserve 11/10/2008 Release

January 14 Treasury Release

Notes:

Amount spent is current as of 1/19/2011 (http://www.federalreserve.gov/releases/h41/Current/). Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

Is not a top-level node

Fed Loan to AIG

Maya MacGuineas — Fri, 10 Jul 2009 19:32:45 +0000

Date:

October 8, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Loans

Maximum Amount:

37800000000

Amount Spent:

The Federal Reserve took $37.8 billion in investment-grade, fixed-income securities from AIG, in return for cash.

Source:

Federal Reserve Oct. 8. Release

Notes:

On November 10th, upon the Federal Reserve's creation of two new limited liability companies formed to assist AIG with its bad assets, the Fed announced that these security-collateralized loans would be repaid by AIG and terminated.

Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

Is not a top-level node

Fed Purchase of AIG Mortgage-Backed Securities

Maya MacGuineas — Fri, 10 Jul 2009 19:29:52 +0000

Fed Purchase of AIG Mortgage-Backed Securities

Date:

November 10, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

23000000000

Amount Spent:

61000000

Federal Reserve provides up to $23 billion in loans to a limited liability company, 'Maiden Lane II,' formed to purchase residential mortgage-backed securities in AIG's portfolio.

Source:

Federal Reserve Nov. 10 Release

Notes:

Amount spent indicates loans outstanding as of 1/23/2013 (http://www.federalreserve.gov/releases/h41/Current/). Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

Is not a top-level node

Fed Purchase of AIG Collateralized Debt Obligations

Maya MacGuineas — Fri, 10 Jul 2009 19:28:05 +0000

Fed Purchase of AIG Collateralized Debt Obligations

Date:

November 10, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

30000000000

Amount Spent:

23000000

Federal Reserve agreed to provide $30 billion in loans to a limited liability company, 'Maiden Lane III,' formed to purchase collateralized debt obligations (CDOs) for which AIG had written credit-default swap contracts.

Source:

Federal Reserve Nov. 10 Release

Notes:

Amount spent represents loan outstanding as of 1/16/2013 (http://www.federalreserve.gov/releases/h41/Current/). Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

Is not a top-level node

Purchase of AIG Preferred Stock

suggp — Fri, 10 Jul 2009 18:09:06 +0000

Date:

November 10, 2008

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

40000000000

Amount Spent:

8780000000

Deficit Impact:

10900000000

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.

Source:

Troubled Assets Relief Program

January 14 Treasury Release

Notes:

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%.

Is not a top-level node

AIG Equity Capital Facility

Maya MacGuineas — Fri, 10 Jul 2009 17:11:08 +0000

Date:

March 2, 2009

Policy Area:

Financial Sector Policy

Economic Target:

AIG

Action Type:

Equity Purchase

Maximum Amount:

29835000000

Amount Spent:

7535000000

Deficit Impact:

8100000000

The Treasury will allow AIG to receive up $30 billion dollars in exchange for AIG preferred stock. Actions taken in coordination with a restructuring of the Fed's line of credit to AIG.

On 1/14/2011, after AIG repaid the New York Fed's credit facility, Treasury transferred part of this facility into 167 million shares of common stock, using the remaining money to hold $20 billion in AIG subsidiaries.

Source:

Treasury March 2 Term Sheet

Fed March 2 Release

Treasury January 14 Release

Notes:

Maximum amount specified in Treasury term sheet. Amount spent current as of 3/21/2012, as reported in Treasury transaction reports.

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 November 2010 Report on TARP, CBO estimated that the total cost of AIG assistance would be $14 billion. It is unclear how the deficit impact breaks down between the two types of assistance.

Is not a top-level node