Gov’t may sell its AIG stock soon
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Kai Ryssdal: Other than Detroit and the carmakers, the big balance due on the TARP bailouts is from AIG. Today, executives from the insurance company got together with government officials to talk about a payback plan. AIG’s chairman, Steve Miller, was optimistic. He suggested the exit plan that’s close to being finalized — there’s no actual date yet — but Miller said it could make a significant profit for taxpayers.
Our senior business correspondent Bob Moon says there’s some chance that might be true — if everything falls into place.
Bob Moon: What’s the rush? That’s what investment consultant Chris Whalen was asking today at Institutional Risk Analytics. He says the government seems to be in a hurry to get the word out that it’s aiming to start unloading its $49 billion in AIG shares within the coming year. Whalen warns the market isn’t ready and won’t support it.
Chris Whalen: We’re trying to do a public offering of shares in a company that can’t stand by itself, that has to have government support. That’s not going to work.
Flooding the market with shares, he cautions, is a money-losing proposition. He says it’s the same catch-22 the government faces with General Motors, and has already run up against trying to sell its Citigroup shares. Gauging by AIG’s total market capitalization — the value of all outstanding shares — he argues the idea of taxpayers making all their money back is pie-in-the-sky.
Whalen: The market cap of this company is single digits. They owe us $100 billion, right? So what the market’s telling you is that the company is worth, today, a tenth of what they owe us.
Whalen says rather than trying to give voters a positive spin before election day, the Obama Administration should be thinking longer term — giving AIG more of a chance to become profitable and stable.
Whalen: So let’s screw our heads on and take our time, there’s no reason to play politics with this.
Even those who support a quick government exit from AIG are doubtful taxpayers can make a profit. Kent Smetters is an insurance and risk management professor at the University of Pennsylvania.
Kent Smetters: It’s likely the government will lose money either way on this deal. The question is, does the government try to cash out now and essentially take out some of its losses, or gamble and try to make more money later on, where there’s a lot of uncertainty?
Either way, American taxpayers find themselves at the mercy of the market — which, we all know, remains a very uncertain place to be.
I’m Bob Moon for Marketplace.
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