Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Reserve Bank of New York and American International Group Inc. to help manage and break apart the insurer, according to a Wall Street Journal analysis.
That would represent one of Wall Street's biggest paydays — four times the fees paid to break up AT&T Corp. in 1996, and nearly double those paid for Visa USA's 2008 initial public offering, the largest U.S. IPO ever.
The federal government's bailout of AIG has left it with a nearly 80% ownership stake. The government has a multiyear plan to recoup the more than $100 billion in taxpayer money it put at risk in the rescue.
The plan requires hiring firms to handle public offerings of some AIG units and outright sales of others, to manage some toxic AIG assets, and for other tasks.
Among the biggest beneficiaries is Morgan Stanley, which has earned about $10 million assisting the Fed, but could collect as much as $250 million from various AIG-related deals, according to some banking experts and documents released by the New York Fed. Goldman Sachs Group Inc., Bank of America Corp. and J.P. Morgan Chase & Co. have all gotten assignments in recent months to help dismantle AIG.
To calculate the possible fee total, The Wall Street Journal tallied estimated fees for deals already struck and others AIG is planning or considering or may have to pursue in the future. Thomson Reuters and Freeman & Co. provided fee estimates on some deals. Documents from the New York Fed indicate typical fee arrangements for various types of deals under consideration. The Journal used those figures, along with estimates of potential deal sizes, to help calculate the possible total.