GAO Report Says AIG Bailout Repayment Remains Unclear
The Government Accountability Office (GAO) recently issued a report (congrats to Andrew Samwick for pointing this out) on the status of government assistance to AIG (click here for a summary and here for the full report).
The report found that although AIG has both stabilized and seen signs of improvement in its insurance business, the company’s ability to survive over the long-term depends on “market conditions and government support.”
While many large banks have recently begun repaying the government for its rescue packages, AIG will continue to struggle to repay its debt. As of September 15, AIG has over $121 billion outstanding in debt owed to the government. So far, over $182 billion has been made available to assist AIG.
According to a New York Times article, a quarterly dividend payment on AIG’s debt will be due in November, after the company had already been given the option to defer payment through a debt relief package in March. However, if AIG misses four payments, the Treasury can elect two directors to its board.
The terms of the company’s repayment of bailout funds have been eased three times so far due to AIG’s inability to pay.
The Federal Reserve and the Treasury have been working to develop potential alternate payment schemes, including an ownership stake in future cash flows, while also promising to monitor and assess AIG’s long-term prospects. Details of such programs have yet to be released.