US Treasury to Sell $18 Billion of AIG Stock

US Treasury Department will sell most of its stake in insurer American International Group (AIG), making the government a minority investor for the first time since it rescued the company in the depths of the financial crisis four years ago.

While the Treasury was universally expected to sell stock this month, the magnitude of the planned S$18-billion (S$22.2-billion) offering was a surprise that will take the government stake in what had been the world's largest insurer to around 20 per cent from 53 per cent currently.

The sale will trigger a number of changes for AIG, the most important of which is that it will now fall under Federal Reserve regulation as a savings and loan holding company since the company owns a small bank. The Treasury will also lose the ability to dictate the terms of further stock sales.

AIG said it would buy up to US$5 billion of the offering. Last week, the company sold part of its stake in the Asian insurer AIA to help fund that buyback.

The sale—the Treasury's biggest sell-down of its AIG stake so far—comes as President Barack Obama campaigns for a second term and has been forced to defend his support of decisions to use taxpayer money to prop up companies during the financial crisis.