AIG is eager to be on its own again, and the Federal Reserve Bank of New York is happy to help. The two institutions have been working feverishly to work out a plan for the insurance company to repay its 2008 bailout before the Treasury's Troubled Asset Relief Program expires on October 3, and on Thursday they announced that they've reached an agreement in principle. AIG won't be under its own steam yet, though, as the plan involves the Treasury Department owning 92.1 percent of the company until it sells its shares. Under the plan, AIG will pay back its $20 billion in loans using a combination of proceeds from the selling off of foreign sections of the company. As for the $26 billion in preferred shares owned by the Fed, AIG is going to buy them back using part of the Treasury's assistance package and then transfer the shares to the Treasury. AIG is eventually expected to convert the Treasury's preferred shares to common stock so that the Treasury can sell them on the public markets. In a statement issued Thursday, Treasury Secretary Timothy F. Geithner said, "While there is a lot of work ahead to execute this agreement, today we are much closer to seeing a clear path out."
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