The Congressional Budget Office projects that the federal rescue of insurance giant American International Group will ultimately cost the Treasury Department $9 billion, a fraction of what was initially expected. This Story * AIG employees agree to cuts in retention bonuses * Treasury's AIG bailout cost estimate is reduced
The estimate, included in the CBO's federal budget outlook released this week, pegs the overall cost of the Troubled Assets Relief Program at $99 billion. The government's rescue of the auto industry is expected to be the most expensive program, at $47 billion, the CBO said. ad_icon
The Treasury offered $70 billion to AIG in the form of loans and stock investments. An offer of $110 billion came from the Federal Reserve. It is not known whether the Fed will lose money on its commitment, although the central bank has said it does not expect major losses.
Obama officials plan to tout the relatively low cost of the $700 billion bailout program next week when the administration unveils its budget for the next fiscal year. Last summer, the program was predicted to lose as much as $350 billion. Late last year, Treasury officials said the cost would be about $117 billion.
This month, President Obama said he intends to get back "every penny" of that money through a new bank tax that would collect an estimated $90 billion over the next decade from 50 big financial firms. The proposal, however, needs congressional approval.
"We are working hard to minimize cost to taxpayers of the support provided to AIG and plan to make up any shortfall with the fee on financial institutions," Andrew Williams, a spokesman for the Treasury Department, said Friday.
Still, the bailout of AIG remains controversial. Lawmakers are investigating whether the Fed used AIG to funnel tens of billions of dollars in a "backdoor bailout" to the insurer's partners, including Goldman Sachs and Deutsche Bank. They are also questioning whether the Fed suppressed information about these payouts.
