NU Online News Service, Nov. 30, 3:39 p.m.EST

WASHINGTON–The Congressional Budget Office todayreleased a report slashing its estimate of the government's cost ofbailing out American International Group to $14 billion–a steepdrop from its March estimate of $36 billion.

The new estimate was contained in a report projecting that thetotal cost of the Troubled Asset Relief Program (TARP) initiated inOctober 2008 will be $25 billion, far less than earlier estimates,including a $66 billion estimate in August. A March reportprojected a total loss of $109 billion.

The losses stem from AIG, funds provided the automobile industryand grant programs aimed at avoiding foreclosures, the CBOsaid.

Other transactions with financial institutions will, takentogether, yield a net gain to the federal government, CBOestimated.

However, the CBO report projecting a $14 billion loss on theinvestment in AIG is still higher than the $5 billion projected bythe Treasury Department in its last estimate.

The decline in the estimated cost of bailing out AIG is lowerbecause of a restructuring of the debt through an agreement withTreasury in September.

In the transaction, Treasury agreed to exchange its existingpreferred stock for approximately 1.1 billion shares of AIG commonstock. CBO based most of its lower projections of the cost ofbailing out AIG on the rising value of AIG stock.

CBO said AIG received financial assistance in two forms throughTARP: $40 billion in purchases of preferred stock by the TreasuryDepartment and creation of a $30 billion line of credit for thecompany.

Through Sept. 30, 2010, all of the preferred stock remainedoutstanding, and approximately $7.5 billion had been drawn from theline of credit. In addition, the company failed to pay thequarterly cash dividends due on those Treasury investments, CBOsaid.

The report is significantly different than estimates by theindependent auditor of TARP.

The independent auditor, in a report in October, included achart indicating that the government only authorized $176.5 billionin aid to AIG, but at its peak, total aid reached $191.4 billion.As of Sept. 30, the end of the government fiscal year, theoutstanding balance on the various facilities was $123.3 billion,the auditor's report said.