On Tuesday, the U.S. government is selling off the last of its shares in American International Group (AIG).
Say what you will about the “bailout,” on this investment, taxpayers are making a killing. Four years after the Treasury Department first invested in the insurance behemoth to keep it from collapsing, it is selling a final round of 234.2 million shares at $32.50 each. Treasury estimates that in total, it will have netted $22.7 billion on the deal. It should give many, liberals at least, reason to pause.
In 2008, when the government first began injecting cash into the private sector many decried it as a big-bank bailout that sold everyday Americans down the river. The symbol of their grief became the Troubled Asset Relief Program (TARP) that was initially authorized to expend $700 billion in public money to purchase assets and equity from financial institutions.
While there is still some disagreement over whether taxpayers will get all their money back and turn a profit on TARP, it looks like they will. In an economic sense, at least, TARP turned out to be a socialist-style program, enacted by a Republican, and bemoaned by many Democratic voters that in the end did what it was designed to do without a loss of public money. That’s a good ending.
The "bailout" did appear to increase risky lending, at least in the short term. But as to whether it created a "moral hazard" in the long run is something that at least politicians are trying to remedy through the Dodd-Frank act and maybe subsequent legislation.
Libertarians and free market purists, particularly, will likely take issue with the fact that the government got involved at all and didn’t let many of these companies fail during the mortgage collapse and ensuing economic free fall. But while that’s tempting to consider, it ultimately wasn’t worth the risk and still isn't.
The results of the "bank bailout" leaves a lot to feel good about.