Michael Burry

Factual · Economics and markets

“That no one else theorized this would lead to the unnecessary nationalization of AIG just a few years later, and would cost taxpayers some $180 billion.”

Michael Burry, lecture speaker · 5 April 2011 · Transcript of Michael Burry's talk, Missteps to Mayhem (Vanderbilt News)

AIG was nationalized a few years after 2005 and the nationalization cost taxpayers some $180 billion.

Mostly false False in substance, right in a detail.

What would count as true or false

Judge as of 2011-04-05. There are two parts: (a) the US government effectively nationalised AIG a few years after 2005, meaning it took majority control or ownership (e.g. the roughly 79.9% equity stake in September 2008); (b) this cost taxpayers some $180 billion. 'Cost' means the net cost to taxpayers. TRUE: (a) holds and official estimates available by April 2011 (Treasury, CBO, SIGTARP, GAO) put the net taxpayer cost or loss near $180 billion (within about ±10%). MOSTLY FALSE: (a) holds and about $180 billion was the total support committed or disbursed, but net-cost estimates available as of April 2011 were far smaller or projected substantial recovery. That is a real figure stated as a cost. MIXED: (a) holds but neither a net cost nor a commitment near $180 billion can be matched. FALSE: the government did not take control of AIG, or no taxpayer figure of roughly that size existed. A formal later correction of the figures for the same period governs. The final outcome after 2011 is otherwise later knowledge and does not count.

Evidence

1. AIG stock swap moves it closer to repaying federal bailout Los Angeles Times · 14 January 2011

   “Treasury converted the preferred shares in AIG it received as part of the complex bailout into 1.655 billion shares of common stock, increasing the government’s ownership stake to 92% from 80%.”

2. AIG stock swap moves it closer to repaying federal bailout Los Angeles Times · 14 January 2011

   “In November, the nonpartisan Congressional Budget Office estimated that the government would lose $14 billion of the $48 billion it gave AIG through the Troubled Asset Relief Program.”

3. AIG, U.S. reach deal on bailout payback Los Angeles Times · 1 October 2010

   “The Congressional Budget Office’s latest estimate, in March, was for a $36-billion loss.”

4. AIG stock swap moves it closer to repaying federal bailout Los Angeles Times · 14 January 2011

   “Altogether, AIG received federal aid commitments totaling $182 billion in a multistep bailout engineered by the Treasury and the Federal Reserve beginning in September 2008, when the company was near failure.”

Reasoning

Part (a) holds: the Treasury's stake in AIG rose from 80% to 92% in January 2011 (E1), following a multistep bailout that began in September 2008 (E4). The roughly $180 billion figure matches total federal aid commitments of $182 billion (E4), but that was money committed, not a net cost. The Congressional Budget Office's net-loss estimates available by April 2011 were far smaller: $36 billion in March 2010 (E3) and $14 billion on TARP funds in November 2010 (E2). Under the criteria, a real commitment figure stated as a cost makes this mostly false.

Cite this claim

Michael Burry, “AIG was nationalized a few years after 2005 and the nationalization cost taxpayers some $180 billion.” (said 5 April 2011). Verdict: mostly false. Reliability API, claim c_af1815ee515d, method 0.1.0+c876030c. https://epistacklabs.com/claims/c_af1815ee515d