Monday, March 2, 2009

Another TARP Dividend Disappears

America's sovereign debt fund (TARP) gave up preferred dividends in two companies, Citibank and AIG. Here's what happened at AIG:

1. Loan of $85 million at 14 percent interest, 80% ownership stake
2. Bought $40 billion of AIG preferred stock, with money from TARP funds. It spent another more than $50 billion to buy up troubled assets.
3. Eased the terms of the initial loan to $60 billion, dropped its interest rate from 14 percent to as low as 5 percent, and extended the payback time to five years rather than two.

Uncle Sam offered another $30 billion for AIG in return for holdings in AIG subsidiaries. It dropped the $60 billion loan to not less than $25 billion and converted the $40 billion in preferred shares to non-cumulative dividend paying shares.

The Obama administration gave up $17.5 billion in taxpayer dividends from Citibank. There is no estimate of interest or dividend givebacks to AIG, but it surely exceeds Citi's. Corporafornication remains alive and well.