The Bailout of AIG: Mission Accomplished?

If we do not act, boldly and immediately, we will replay the depression of the 1930s, only this time it will be far, far worse. We don't do this now, we won't have an economy on Monday.

Fed Chairman Ben Bernanke, "Too Big To Fail".

On Friday September 14, the US government announced the completion of the sale of AIG stock taxpayers bought during the financial crisis bailout of the insurer. The government took in $20.7 billion for the sale and is no longer the majority owner of the company. At the peak of the crisis, taxpayers owned almost 80% of AIG.

Andrew Ross Sorkin, New York Times reporter, CNBC host, and author of "Too Big To Fail" used his DealBook column to ask former Special Inspector General of TARP Neil Barofsky if he was satisfied, finally. Sorkin says the US Treasury made a profit on the AIG transaction.

As we approach the four-year anniversary of the collapse of Lehman Brothers and the rescue of A.I.G. next week, sadly, much of the public - and people like Mr. Barofsky, as well-intentioned as he is - are still criticizing and debating the merits of the bailout. It's almost become a cottage industry.

In his book, Mr. Barofsky wrote, "Treasury's desperate attempt to bail out Wall Street was setting the country up for potentially catastrophic losses."

As distasteful as the rescue effort was, it should be clear by now that without it, we faced an economic Armageddon. And the results thus far of bailing out the big banks, and A.I.G., indicate a profit.

Treasury never uses the term "profit" to describe what taxpayers would receive. The GAO did in a report in May when it estimated the proceeds that could be realized at various sale prices.

I wrote in American Banker about Sorkin's claim that the bank bailouts prevented "financial system Armageddon" and his debate with Barofsky. I think "profit" is not only the wrong term but an answer to the wrong question.

Read this article in its entirety at the re: The Auditors, a blog by Francine McKenna.

For more information about LexisNexis products and solutions connect with us through our corporate site.