NU Online News Service, March 18, 3:45 p.m. EDT
The Congressional Budget Office, in a report on the Troubled Asset Relief Program, said American International Group has failed to pay quarterly cash dividends due on $40 billion in preferred company stock that the Treasury purchased to bail out the company.
The Treasury provided TARP assistance to AIG in two forms–purchasing $40 billion in preferred stock, and creating a $30 billion preferred line of credit for the company.
The maximum amount that can be borrowed under the line of credit, according to CBO, is $30 billion, less $165 million for retention-bonus payments made to employees of AIG Financial Products Corp. and AIG Trading Group Inc. in March 2009.
AIG's agreement with Treasury allowed for the non-payment of dividends on the preferred stock, but after a certain number of quarters, the Treasury will have the right to appoint directors at the company.
CBO also said that as of mid-February 2010, approximately $7.5 billion had been drawn down from AIG's line of credit, and CBO estimates that AIG will use all of the remaining funds.
Each financial institution that received funding through the TARP capital purchase program must pay a dividend equal to 5 percent of the government's investment in that institution for the first five years, and 9 percent thereafter.
AIG had no comment on the report.
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