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The Federal Reserve finally has wiped its hands clean of AIG and turned a nearly $18 billion profit for taxpayers in the process.
That said, the U.S. government is not entirely free of AIG. The Treasury Department still owns $29 billion, or roughly 53% of AIG's common stock. The Treasury Department has said it too expects to make a profit on that investment, as it sells the shares over time.
The U.S. Treasury and Federal Reserve together committed up to $182.3 billion to support AIG at the height of the crisis, and at its peak the New York Fed lent over $90 billion to the company and investment vehicles that purchased AIG-linked assets. The regional Fed bank has been fully repaid on its various loans.
The Fed's moves were criticized from some quarters as a backdoor bailout for banks that exposed U.S. taxpayers to undue risks. But from the outset, Fed officials including Chairman Ben Bernanke said they were acting to protect the country from financial meltdown and expected to be fully repaid on loans provided to support AIG.
"It's a happy ending with the Fed making a handsome profit—but the purpose of the purchases was to stabilize the financial system and not to make money," said Sung-Won Sohn, an economics professor at California State University, Channel Islands.
By 2022, the bailouts are expected to produce a profit for taxpayers – as much as $163 billion in a best-case scenario. That’s a stark turnaround from predictions of hundreds of billions of dollars in losses in the immediate aftermath of the unprecedented interventions.
Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
Lawmakers knew none of this.