American International Group, Inc. (NYSE:AIG) : U.S. Fed makes $6.6 bln Profit from Bailout Deal

The U.S. Federal Reserve Bank has made multi-billion dollar profits from its bailout package extended to American International Group, Inc.(NYSE:AIG) after the insurance group nearly went bust in the wake of the financial crisis in 2008.

The New York Fed, which is the investment management arm of the Fed, said on Thursday that it has sold off the last of its holdings in AIG, making a gain of $6.6 billion from the transaction, while taxpayers earned about $17.7 billion.

"The sale marks the end of an important chapter...that was undertaken to stabilize the financial system in the midst of the financial crisis," New York Fed President William C. Dudley said.

The AIG bailout was engineered in 2008 in conjunction with the Treasury Department.

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As part of the bailout, the government pledged about $182 billion to AIG and picked up a 92 percent stake in the financial services giant effectively staving off a bankruptcy filing.

AIG used only about $125 billion of the money to resuscitate itself while both the Fed and the Treasury started the process of detaching the government from AIG from 2011 onwards.

The Treasury Department still has about $25 billion invested in AIG as it slowly sells its shares in the company. The Treasury sold about $5.75 billion in AIG stock this month, reducing the government's stake to about 53 percent.

"I am pleased that we were able to achieve our principal goal, which was to protect the U.S. economy from the potentially devastating effects of AIG's failure, while demonstrating sound stewardship of taxpayer interests," Dudley said.