With Sale of Bonds, a Component of AIG Rescue Winds Down

God bless Barack Obama. He saved us from worldwide economic catastrophe.

How good to be AIG and have the Fed buy your debt and and pay off your over-leveraged, un-collateralized credit-default swaps obligations. Securities insured by default-swap transactions do not reflect the true risk of these instruments - remember triple A-rated CMOs, MBSs and now the Euro Sovereign Bonds? Risk premium in the underlying is completely distorted by the false sense of 'hedging' these contracts offer. The Fed has been able to mitigate the damage with a stroke of its pen and now the ECB will likely follow suit in Greece. Debt has eternal shelf life. But should the Euro bond speculators not get their lottery-sized winnings from their naked swap purchases you will see a log jam in the Eurozone courts as contracts are nullified. We could have done the same in 2008 but chose instead to suffer a deep protracted recession rather than dishonor the tradition of honoring a gentleman's speculative wager. Yes. It's good to be AIG.

How much did the war in Iraq cost and how much of the deficit is due to money loaned from China to wage war and cutting the taxes on the richest while waging war in Iraq? Also, weren't we told we would make money from selling Iraqi oil? Such debt continues in the deficit and even increases due to debt service, etc.. That has gone on and on for almost almost a decade, while the auto loans people are complaining about were only issued about three years ago and the benefits are beginning to be seen and will continue to benefit all of us. Without the loans, there would be no suppliers surviving to supply Ford and other auto companies.

So here is the big question. If we know that these emergency loans added a couple trillion to the U.S. deficit, as they unwind successfully, how come we aren't seeing the deficit reduced? I'm guessing that these trillions of dollars are being invested elsewhere to shore up the economy, but why aren't U.S. citizens being kept up to date as to exactly where its being redirected to (since it is the public's money)?

It's really not that complicated people any profits from the sale are going into the treasury.. aka it's revenue for the Federal Government. The budget deficit has gotten smaller..however it's a still about a trillion dollars a year. The payroll tax cut and other things have prevented it from shrinking further. If we got rid of the Bush tax cuts, ended the wars, and cut spending across the board we could probably get pretty close to getting rid of it all together. Of course we would still have ALOT of debt to pay off.

Good deal, thanks for sharing. It is nice to hear some good news and follow up to the Great Panic of 2008. Good work for following this up. I don't see anyone else reporting on this.

Does this mean that Tim Geithner is a really good banker?

The unions and bankers have done great. We are nowhere near getting our money back from all the special interests that have been taken care of. Tell us about the people that saved for retirement getting .025% on their retirement savings so that we can have free money for banks and insurance companies. We haven't paid for anything lately, just kicked the can down the road.

Let me Credit Suisse and Government Sachs bought the bonds from Maiden Lane II. What a stunning success. But hlod, wait just a minute. How did the buyers fund their purchases? If they indeed funded them through income earned from operations, then by all means let's pop the Champagne corks and celebrate. But if they funded the purchases with near zero interest loans from the Fed, nothing has really changed, hasn't it?

Should we be happy about this or should we be demanding indictments?

Something stinks here. Screw AIG, the Fed, Wall Street and these fictitious “vehicles” conjured up by the Fed. Maiden Lane II (and yes, the fed also created Maiden Lane I $29 billion and Maiden Lane III $24.3 billion) was created by the Fed who loaned it $19.5 billion to purchase CDOs with a face value of $39.3 billion. So they devalued this crap by half. The whole thing is managed by Blackrock and Ernst & Young who you can bet aren’t volunteering to do so for free.

Now, we’re all supposed to be happy about the fact that banks such as Goldman Sachs and Credit Suisse are buying this stuff back at auction. They are essentially buying back the same crap they created and sold but at huge discounts from the original sales price. What an incredible deal! And, after Goldman had already received $13 billion from AIG, which was 100 cents on the dollar, after AIG was bailed out by the American hardworking taxpayers.

There is more to this than this short story reveals and no one should be happy about the fact that Lloyd Blankfein took home $68 million in 2007, right as this whole mess started to blow up. And in 2009 after the mess was fully exposed and American taxpayer bailouts were in full swing the wunderkinds who created the mess on Wall Street paid themselves a staggering $140 billion.

$225 Bn bank bailout has been repaid -- US Govt makes about $24 Bn profit
$182 Bn AIG bailout is almost repaid -- US Govt will make a small profit
$82 Bn automaker bailout will lose $14 Bn (estimate from the "auto czar")

Gotta hand it to Hank Paulson -- he managed to turn a profit and simultaneously get Americans to hate their government. Impressive.
(And to be fair, I did not mention the $180 Bn down the drain for Fannie & Freddie)

To answer the question below, $14 Bn loss on the automaker bailout is $47 per person. Go ahead and put that in your glove compartment.

OK, Daniel Gross, didn't you forget to tell us something? The Fed took bids on the Maiden Lane II assets BY INVITATION ONLY! Bernanke should go to jail, and locked in a cell with Bubba.This was such a good deal for the banks that were invited to bid that Bernanke COULDN'T just let anyone make that score. Bernanke bent the U.S. taxpayer over and stuck it to 'em again!

haha, but, usa is falling, weaker, jobs ship to oversea, technology ship to over sea, Appl not made in usa, no jobs for american, hopeless

AIG has come to symbolize everything that went wrong in this country and everthing that is wrong with this country including all the corrupt politicians that approved a bailout of this failed company, including Obama and his twinkletoed pay czar approving the $10M undeserved middle class taxpayer funded compensation plan for its failed CEO. It makes all of us sick to our stomachs and we wish this failed company would just close its doors and that those involved in its middle class taxapayer rescue go away and never come back, including Obama.

"But this component of the AIG rescue is likely to end over the next several weeks -- and may even help reduce this year's deficit by a couple of billion dollars."

Yay, so instead of deficit spending of $1.300T, we will only have deficit spending of $1.294T!

How will this potentially affect AIG stock? Lift or push back? Right now I am under water with AIG and would like to see it double as soon as feasible.

I take advantage of the price gold today and by the used of secret code videos of G.o.I.d.T.r.a.d.i.n.g.A.c.a.d.e.m.y I am earning every day.

Daniel, the paid cheerleader for Obama. Nice job.

So boys and girls, it turns out in this story that government and business can truely work together for the betterment of all. The end, now go to sleep.

It is the individual investor out there that should have taken a hit owning some bankrupt AIG stock, but you have a public middle class taxpayer backing this stock, just like when Obama declared that the middle class taxpayer would continue to be a backstop to the failed, corrupted and washed-out GSEs, like Fannie and Freddie. This was one of the worst public relations standard-statements-type-of-thing, but we all know that despite what Giethner, Bernanke, and Obama's twinkletoed pay czar tell us, we all know that it is calamitous for the middle class taxpayer to reward failure, to pay the failed AIG CEO $10M a year for sitting around all day doing nothing but making devastatingly bad decisions that caused this bankrupt company to go bankrupt. Thank god there was a talent pool in that failed company, otherwise Obama's pay czar would have had to make up some other story, other than the one that he stated: 'If we hadn't paid these failed execs their undeserved $600K annual bonuses, they would have left the talent pool of the bankrupt company causing the bankrupt company to go bankrupt.' Where in Econ101 did you learn that bankrupt companies have talent pools. I have googled it, I have even gone as far as going to a world class library and using the Dewey decimal system, I could find NOTHING! NOTHING about bankrupt companies having a talent pool. And I also saw a common thread about how bankrupt companies go bankrupt because they lack a 'talent pool'. Obama needs to shed the idiots that are around him and assemble a cast of 'loyal to Obama's call (and the people's call)', that can give him good advice of how to let failure, fail and not to reward failure with middle class taxpayer dollars. The CEO of AIG should have received no more money than a 20 year old single mother of 4, all from different fathers gets in welfare. After all, the single mother of 4 didn't know any better. OBAMA! Stop rewarding failure with middle class taxpayer's dollars. Pay for it in fat cat taxpayer's dollar, if you must, but leave us middle class taxpayers out of it. We are tired of rewarding failure. We need someone to deliver your vision and rhetoric to reality and you seem unqualified, at the moment. Deny the AIG CEO $10M annual compensation, put him on scale with all the other welfare recipients.

We would have continued to be ignorant if things continued to prosper, but we have all had to read up on it, as there is still 8% unemployment and a vast expanse of vacant office space goes vacant in the extended Ohare corridor in towns like Bensenville, Woodale, Elk Grove Village, Des Plaines, Franklin Park, etc. Hopefully the Republicans in the primary that are talking about pro-life and pro-abortion (if there is such a thing) and family values. And talking about rolling back Obamacare to the failed system we had before. I sure hope we get a third party candidate that can actually follow though with Obama's statement (at the state of the union): 'no more bailouts' and just stop using middle class taxpayer money to reward failure and pay people like the CEOs of Fannie, Freddie and AIG millions of dollars a year to sit around all day long making devastatingly bad decisions. We need new leadership. As a middle class taxpayer, I don't want to be a backstop anymore, I want to return to being the backbone of this country, give us a leader that can make this happen, please...