U.S. Wants to Cut Ties with AIG

The Obama administration wants to quickly untangle itself from AIG and is working toward releasing a plan to do so by next week—just ahead of the midterm elections. Under the plan, the Treasury Department would convert its shares in the insurance giant into common stock by the end of the year, and then sell that stock to private investors. The Federal Reserve Bank of New York has been in talks with AIG for weeks, as has a trust set up to hold company stock in the public’s name. But all three parties have to be careful not to sell off their shares too fast, because that could lower the value of AIG stock and bring in less money for taxpayers. The government owns 80 percent of AIG, and to break free, it will have to temporarily boost its share to 90 percent. Unfortunately, investors still have a rather low opinion of AIG’s future, as its stock closed at $37.32 Tuesday, less than 5 percent of its value in 2007. Though the company is healthier, it hasn’t passed several key milestones that would indicate it can function on its own.