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The Fed Turns a Profit on AIG

Last month, the Federal Reserve announced that it closed another chapter in the bailout story.  And it turned a profit.

Back in 2008, staring in the face of the financial crisis, the Fed created three companies called Maiden Lane (I, II, and III).  It was through these companies that the Fed lent money to financial institutions, among them American International Group (AIG).   Two of the companies, Maiden Lane II and III, were created to “alleviate capital and liquidity pressures” on AIG.  At the time, the Fed’s goal was that the money would be repaid in full.

And it was.

In January of last year, the Fed wrapped up the credit it had extended to AIG…and raked in $8.2 billion in taxes and fees.  Then in February of this year, the Fed wound down Maiden Lane II.  And taxpayers got a $2.8 billion pay-back.

And last month, the Fed announced that it sold off the last of the securities it was holding related to the AIG bailout in Maiden Lane III.  And the sales resulted in a $6.6 billion profit.

Source: Federal Reserve Bank of New York

When you add it all up, the total taxpayer profit from the AIG bailout comes out to something like $17.6 billion.

And in closing Maiden Lane III, the Fed brought the Maiden Lane loan balances down to nothing.

Source: Federal Reserve Bank of New York

But the AIG story isn’t over yet.  The Fed may have washed its hands of AIG, but the government hasn’t.  The Treasury Department is sitting on 53% of AIG common stock…which amounts to $29 billion on the line.


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