AIG Contributes $3.4 Billion to Fed Revenue
January 12, 2011 by Arthur D. Postal
Published 1/11/2011
WASHINGTON BUREAU — The Federal Reserve Board earned about $3.4 billion in 2010 on its investments in American International Group Inc. (AIG).
The Fed earned $2.1 billion in interest income on credit extended to AIG, New York (NYSE:AIG), and $1.3 billion in dividends on preferred interests in AIA Aurora L.L.C. and ALICO Holdings L.L.C., according to a preliminary, unaudited description of the Fed’s 2010 financial results.
AIG recently sold ALICO — American Life Insurance Company — to MetLife Inc., New York (NYSE:MET).
AIG divested much of AIA Aurora — American International Assurance Company Ltd. – through an initial public offering in September 2010, but it still owns a one-third stake in AIA, according to securities filings.
The Fed also controls two limited liability companies, Maiden Lane II and III, that hold mortgage-backed securities originally acquired by AIG.
The Federal Reserve Bank of New York and the U.S. Treasury Department invested heavily in AIG in late 2008, when officials believed that AIG was about to collapse and cause other large financial services companies to fail.
The Fed discusses earnings on AIG-related investments in a general update on its 2010 financial performance.
The Fed earned a total of about $81 billion in 2010, up from about $53 billion in 2009, and it already has sent more than $78 billion of the 2010 earnings to the Treasury Department, officials say. The large increase in earnings is due primarily to gains on securities that the Fed bought in 2009 and 2009, in an effort to keep the economy afloat.