The following editorial appeared recently in the Kansas City Star:
Not much is heard these days about the bailout of American International Group. We're more likely to see stories about bailout recipients with continuing problems, such as GM, Fannie Mae or Freddie Mac. But AIG was perhaps the most spectacular — and outrageous — exemplar of the panic of 2008 and excesses of Wall Street.
The reason AIG hasn't been much in the news is because the news of AIG has been remarkably good. The company, which at one point was propped up by a $182 billion Treasury commitment, is making money. And now it's clear that Uncle Sam will make a money on his "investment."
The Treasury Department says it soon plans to unload what's left of its AIG holdings. This won't be the government's first sale of its AIG stake, but all told, it expects to show a net return of more than $15 billion.
AIG was only one of many companies to which cash was shoveled four years ago, when it looked as if the entire global financial system was at risk. But it was AIG that seemed to generate the greatest public resentment.
Small wonder. Days after taxpayers anted up billions to save the company, AIG executives took off for a "retreat" at an exclusive resort, where AIG spent half a million dollars on hotel rooms, catered banquets, and perks like manicures and massages.
Federal Reserve Chairman Ben Bernanke told Congress that while he concluded the AIG bailout was necessary because of the threat to the overall economic system, it still made him livid. Thanks to AIG's reckless underwriting of credit-default swaps, regulators feared that a collapse would trigger a contagion that could bring down its network of counterparties and cripple the global economy for years.
The galling reality of the AIG action meant that, indirectly, taxpayers bailed out the likes of Goldman Sachs and Deutsche Bank.
Under new management, AIG has modernized its core insurance business, sold assets and clawed its way back to profitability. Earlier this year, a Wall Street firm — Bernstein Research — said AIG was a "recapitalized and de-risked firm, on a stable footing and pursuing a thoughtful renewal."
Many still argue that AIG should have been allowed to collapse so that the timeless lesson of excessive risk could be driven home to those culpable. But as Bernanke recognized, the risk of allowing AIG to collapse might also have set off a market disaster far greater than the one that destroyed the assets and hopes of so many people.
We'll never know the answer to that one; we'll never get a definitive accounting of the bailout's costs and benefits, because we can't know what would have happened in the absence of a bailout. Still, this is one chapter of the story that is ending unexpectedly well.