U.S. AIG Cost Estimate May Be Generous, Report Says

The U.S. Treasury Department estimate of losses from the bailout of American International Group Inc. uses questionable methods and may be too optimistic, the Troubled Asset Relief Program’s inspector general said.

The department’s projection that it will lose $5 billion on its TARP investment in AIG “represents a dramatic shift from the $45 billion loss that Treasury had projected in its AIG investment just six months earlier,” Neil Barofsky, special inspector general for TARP, said in a report today. “While AIG’s fortune may have indeed improved during the course of those six months, there is a serious question over how much of this decrease comes from a change in Treasury’s methodology for calculating the loss as opposed to AIG’s improved prospects.”