GAO: AIG improving but may never fully repay gov’t
WASHINGTON — Despite some progress, congressional investigators on Monday cast doubt on whether efforts by American International Group Inc. to restructure its operations and pay back the government will ever prove successful.
Still, the company’s shares jumped about 15 percent after the head of the House Committee on Oversight and Government Reform said that panel will examine a plan to reduce the AIG bailout package.
In the biggest taxpayer-funded bailout of a single company, the Federal Reserve and Treasury Department have provided $182.3 billion to the insurance giant. The Government Accountability Office said that as of early September, AIG’s outstanding balance of aid was $120.7 billion.
The GAO found “some progress in AIG’s ability to repay the federal assistance.” But improvement in the company’s stability depends on its long-term health, market conditions and continued government support.
The report concluded that “the ultimate success of AIG’s restructuring and repayment efforts remains uncertain.”
Responding to the report, AIG spokesman Mark Herr said: “AIG remains committed to reducing risk and repaying taxpayers.”
Fearing that AIG’s collapse could take down the entire U.S. financial system and the broader economy, the Fed first came to AIG’s rescue last September.
The original $85 billion aid package came one day after Lehman Brothers filed for bankruptcy, the largest in U.S. corporate history. AIG burned through the first lifeline, though, and continued to hemorrhage cash. It needed help three more times from the government, which owns about 80 percent of the company because of the bailout.
Congressional investigators acknowledged that the federal assistance has “helped stabilize AIG’s financial situation.” But they said the government remains exposed credit and investment risks that “could result in the Federal Reserve and Treasury not being repaid in full.”
Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight Committee, will have that panel study a plan by AIG’s former CEO Maurice “Hank” Greenberg to reduce and restructure the company’s bailout package, a committee spokeswoman said Monday.
Towns, who has not spoken to the Treasury Department about the plan, met with Greenberg last week, the spokeswoman said.
Greenberg was ousted as CEO in 2005 amid an accounting scandal. He still holds millions of shares of AIG stock through a privately held investment company called CV Starr & Co.
Standard & Poor’s equity analyst Catherine Seifert upgraded her rating on AIG’s stock to “Hold” from “Sell” Monday, saying Towns’ review of Greenberg’s plan should boost the insurer’s stock price in the near term.
Seifert raised her price target on the stock to $45 from $30.
AIG shares have been extremely volatile in recent months as investors bet on whether the New York-based company will be able to pay off its government debts and fully recover from the economic downturn. Its shares surged $5.79, or 14.5 percent, to $45.70 in afternoon trading.
AP Business Writer Stephen Bernard in New York contributed to this report.
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