Bloomberg News

AIG Bailout Ends Four Years After Two-Year Plan: Timeline

December 11, 2012

The U.S. Treasury Department is exiting its equity stake in American International Group Inc. (AIG:US) through the final sale of shares acquired as part of a 2008 bailout that swelled to $182.3 billion.

Below is a timeline of the insurer’s near-collapse and bailout, followed by asset sales and a return to profit (AIG:US) that helped Chief Executive Officer Robert Benmosche end the rescue.

March 14, 2005: AIG names Martin Sullivan to replace Maurice “Hank” Greenberg. Sullivan becomes the third CEO in AIG’s history. Greenberg had taken the company public in 1969.

May 26, 2005: New York Attorney General Eliot Spitzer sues AIG and Greenberg, saying they used accounting tricks to mislead regulators and investors.

Feb. 9, 2006: AIG agrees to pay $1.64 billion to resolve state and federal allegations that it misled investors and regulators.

Aug. 9, 2007: Joseph Cassano, head of AIG Financial Products, says derivatives tied to mortgages can withstand a housing slump. “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing a dollar in any of those transactions,” he says.

Dec. 5, 2007: Sullivan says housing-related writedowns will be “manageable.” The “effectiveness of our risk-management efforts will show through,” he says. Shares rally to a reverse- split-adjusted $974.26.

Feb. 29, 2008: Sullivan says Cassano is stepping down after AIG reported $11.1 billion in losses on the derivatives.

May 12, 2008: Greenberg, who denied wrongdoing in Spitzer’s probe, says in a regulatory filing that the insurer is in “crisis” and that shareholders have lost about $80 billion in the past year as the mortgage market slumped.

June 15, 2008: Robert Willumstad replaces Sullivan as CEO.

Sept. 15, 2008: Treasury Secretary Henry Paulson says after Lehman Brothers Holdings Inc.’s failure that he never considered bailing out the securities firm, and that banks’ discussions to provide a lifeline to AIG wouldn’t put taxpayer funds at risk. “What is going on right now in New York has got nothing to do with any bridge loan from the government,” he says.

Sept. 16, 2008: The Federal Reserve Bank of New York agrees to loan as much as $85 billion in exchange for an AIG stake of almost 80 percent. Willumstad is ousted.

Sept. 18, 2008: New CEO Edward Liddy tells employees he intends to repay the two-year Fed loan early. Shares close at $45.07.

Oct. 8, 2008: Liddy gets an expanded bailout with an additional $37.8 billion in liquidity as AIG struggles to meet the demands of clients pulling out of its securities-lending program.

Oct. 9, 2008: Liddy cancels most conferences after the White House criticizes a gathering of agents at a California resort.

Oct. 22, 2008: The $122.8 billion credit line “may not be enough,” Liddy tells PBS.

Nov. 10, 2008: Treasury commits to invest $40 billion. The New York Fed agrees to create vehicles named Maiden Lane II and III to spend up to $52.5 billion buying mortgage-linked securities owned or backed by AIG. The credit line is cut to $60 billion and AIG wins a lower interest rate and three extra years to pay.

Jan. 27, 2009: About 400 workers at Financial Products were offered $450 million in retention pay, Bloomberg News reports.

March 2, 2009: AIG reports a record fourth-quarter loss of more than $60 billion and gets an additional Treasury injection of as much as $29.8 billion, raising the bailout to $182.3 billion.

March 3, 2009: Federal Reserve Chairman Ben S. Bernanke says AIG operated like a hedge fund, and having to rescue the firm made him “more angry” than any other episode in the credit crisis.

March 15, 2009: AIG, under pressure from lawmakers, says Wall Street got more than $90 billion from the firm after its rescue tied to securities-lending and credit-default swaps. Goldman Sachs Group Inc. and Societe Generale SA got the most funds.

March 18, 2009: Liddy tells Congress he asked employees in the derivatives unit getting retention bonuses of more than $100,000 to return at least half.

Aug. 7, 2009: AIG posts its first profit in seven quarters.

Aug. 10, 2009: Benmosche becomes AIG’s fifth CEO since 2005.

Nov. 19, 2009: The rescue is called a “backdoor bailout” of Wall Street banks by lawmakers.

Dec. 1, 2009: The government allows AIG to reduce its credit- line debt by turning over two non-U.S. life divisions, American Life Insurance Co. and AIA Group Ltd. (1299), to Fed vehicles.

Jan. 8, 2010: Treasury Secretary Timothy F. Geithner is asked to testify before Congress after Bloomberg News reported that the New York Fed asked AIG in 2008 to withhold bank-payment details from the public. Geithner led the district bank in 2008.

Jan. 27, 2010: Geithner says the AIG bailout prevented an “utter collapse” of the U.S. economy.

Feb. 26, 2010: AIG Chairman Harvey Golub says pay limits imposed as part of the bailout make “little business sense”

March 8, 2010: MetLife Inc. (MET:US) agrees to buy Alico for $16 billion.

June 10, 2010: AIG’s rescue had a “poisonous” effect because it showed the U.S. would rescue firms if risky bets went bad, Elizabeth Warren’s Congressional Oversight Panel says.

Sept. 30, 2010: AIG says it will convert Treasury’s $49.1 billion preferred stake to common shares for sale to investors.

Oct. 29, 2010: AIG sells a majority stake in AIA in an initial public offering in Hong Kong, raising about $20.5 billion.

Jan. 14, 2011: AIG repays Fed credit line and swaps Treasury’s stake for common stock, giving the U.S. a 92 percent holding.

March 30, 2011: The New York Fed says it will auction bonds from the Maiden Lane II fund created to stabilize securities lending.

May 6, 2011: AIG Chief Financial Officer David Herzog says “we’re really not going to pay much income tax to the U.S., as we have very large deferred-tax assets” accumulated when the company was unprofitable. Benmosche said the assets will be a “source of funds” helping AIG repurchase stock from the U.S.

May 24, 2011: The U.S. and AIG sell shares at $29 apiece in the insurer’s first stock offering since the bailout, raising $8.7 billion and cutting the government’s stake to about 77 percent.

Feb 23, 2012: AIG books a $17.7 billion tax benefit as the insurer cites a return to “sustainable operating profit.”

March 12, 2012: Former oversight panel members led by Warren say AIG got a “stealth bailout” by avoiding taxes. Treasury has said that laws prohibiting the transfer of tax assets when a company changes hands don’t apply to government rescues.

Aug. 23, 2012: The New York Fed ends its portion of the rescue with the sale of the last mortgage debt it assumed in the Maiden Lane III vehicle, created to cancel credit default swaps.

Sept. 11, 2012: The U.S. cuts in stake in AIG to 16 percent from a majority, selling $20.7 billion of shares at $32.50 apiece in its fifth offering. Including the Fed’s mortgage-bond sales, taxpayers have recouped the cost of the bailout with a profit.

Dec. 10, 2012: AIG agrees to sell a majority stake in a plane- lease unit to a group of Chinese investors for $4.23 billion.

Dec. 11, 2012: The Treasury says shares were priced at $32.50 in its last offering, raising $7.6 billion. Overall profit on the bailout climbs to $22.7 billion.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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Companies Mentioned

  • AIG
    (American International Group Inc)
    • $54.61 USD
    • -0.07
    • -0.13%
  • MET
    (MetLife Inc)
    • $55.87 USD
    • 0.07
    • 0.13%
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