American Insurance Group

The US Treasury has announced a sale of $5 billion worth of American International Group, Inc. (NYSE:AIG) shares, $2 billion of it will be repurchased by AIG.

This is the third offering by the Treasury off American International Group, Inc. (NYSE:AIG shares in the last year which has decreased the government’s stake from 70% to 63%.  In this offering, the Treasury is looking to unload 163.9 million shares at an average price of $30.50.

This is yet another sign of the winding down the relationship between the US government and AIG.  As you know, AIG was getting involved in risky mortgage assets which then required the US Treasury to give the insurer a $182 billion package to avoid failure.  Luckily, the government will not only get its money back but the Treasury actually made money on the deal as AIG’s share price has rebounded in recent years.

Don’t get too excited because the TARP program is currently showing a loss of $60 billion despite the belief that TARP is going to turn a profit for taxpayers.  According to economists and people familiar with the TARP situation, that number has the ability to grow because it is widely suspected that a majority of the community banks that took bailout money will not be able to pay back its obligations to the US government.  There are a few banks that were able to pay back their TARP loans though such as JP Morgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC), Wells Fargo & Company (NYSE:WFC) and PNC Financial Services (NYSE:PNC).

Overall, we can pretty much say TARP was a failure but there is something to be said about how things would have been different if these banks didn’t get relief funds.  What if Bank of America or JP Morgan failed? That would have had a devastating effect on the economy and the stock market.  Even if AIG failed that would have been a big deal because if your insurance company goes down then that is a sign that things are very bad.  In an effort to keep the chaos in check, the government risked hundreds of billions of dollars to get AIG’s doors open.

Ultimately, it is easy to sit around and criticize the US government and their role in the bailouts of our nation’s banks and automakers but at a certain point you have to ask yourself what 2008 would have really been like if the government didn’t have these programs.