I called Mr. Barofsky to see if he had any regrets about his earlier pronouncements now that the rescue of A.I.G. appeared profitable.

“Whoa! Whoa! Whoa! They are not making money!” Mr. Barofsky, now a senior fellow at New York University School of Law, said when I reached him. “They are on the path to very significant losses!”

Team Sorkin on this one. Take a look at the NY Fed’s AIG page; it gives you an idea of just how complicated this bailout was, along with its numerous subsequent recapitalizations. But if you boil it down, AIG got bailed out with some equity from TARP, a lot of debt from the Fed, and various hybrid instruments which wound up moving back and forth between the Fed, AIG, and Treasury in accordance with extremely complex financing arrangements. It’s a ridiculous oversimplification to try to ring-fence the TARP money and look at it alone, without looking at the broader context. Zoom out a tiny bit, and the question is simple: how much money did the government give to AIG, and how much money is it getting back. Looked at that way, it’s making a profit. Which is quite impressive, given we all thought at the time that AIG was a black hole which would swallow up somewhere north of $100 billion.

Plot Twist in the A.I.G. Bailout: It Actually Worked - NYTimes.com

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