The U.S. Treasury sold a portion of its AIG shares, in a move that reduces the government's holding by 20%.
According to market reports, the 200 million shares were priced at $29 each. "Today's announcement represents an important milestone as we continue to exit our stake in AIG and wind down [the Troubled Asset Relief Program]," Treasury Secretary Timothy Geithner said in a statement.
The Treasury made a small profit on the sale slightly above breakeven. However, the amount is significantly less than was expected a couple of months ago.
At the same time, the Federal Bank of New York, which also started its process of unwinding AIG assets via its Maiden Lane II (ML II) auctions, this week said it would be halting auctions for the next two weeks and would not pick them up again until June 6, with a follow-up auction planned for July.
The strategy shift suggests that the government agency may be giving in to pricing concerns. ABS market players have complained that the auctions were flooding the market with non-agency RMBS paper.
One market source said that with both sales — the Fed with ML II and the Treasury with its version of unwinding AIG shares — the government has seemingly placed the value in de-risking over maximizing returns for the taxpayer.
"A private equity firm may have pulled back and held on to the AIG shares to maximize returns, but the government was trying to 'de-risk'," an industry source said. "The government's sale of a portion of its stake in AIG sold at a slight profit, down from where it was six months ago. In ML II, the government is trying to 'de-risk' and reduce investment. It has demonstrated that it is not as important to the government to simply maximize returns. "
After the transaction, the U.S. government's remaining stake in AIG will be $53.1 billion.