Was the AIG bailout a success?

The government made a tidy profit of $22.7 billion. But a celebration may be a tall order

AIG
(Image credit: AP Photo/Shizuo Kambayash)

The Treasury announced on Tuesday that it had sold its last remaining shares in insurance giant American International Group, restoring the company to full private ownership. Furthermore, the Treasury made a healthy $7.6 billion profit on the sale, bringing the total net gain from the government's "investment" in the troubled company to $22.7 billion.

Few saw this day coming. During the financial crisis of 2008, AIG was the poster-child for everything wrong with Wall Street. The company was saturated with derivatives tied to mortgages, the equivalent of gambling the entire house on a single bad bet. And when you consider that AIG was the insurer for 100,000 entities, from retirement plans to major companies, it was more like betting the entire financial system. The government was forced to step in, at one point investing a mind-blowing $182 billion to prevent AIG from collapsing under the weight of its own rot. Federal Reserve Chairman Ben Bernanke, channeling public outrage in his inimitably understated manner, said the rescue of AIG had made him "more angry" than any other bailout.

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Ryu Spaeth

Ryu Spaeth is deputy editor at TheWeek.com. Follow him on Twitter.