U.S. bailout cost seen lower at $89 billion: report

NEW YORK (Reuters) - The government's bailout of the financial system is expected to cost $89 billion, much lower than earlier projections, the Wall Street Journal reported on Sunday, citing Treasury Department officials.

The Journal also said that Treasury officials were looking into ways to disentangle the government from its nearly 80 percent stake in American International Group Inc (AIG.N).

The officials are hopeful that the bailed-out insurer could be on its own within a year, the paper said.

Last month, Reuters reported that the government was likely to follow an exit strategy similar to what it had used with Citigroup Inc (C.N) to untangle itself from AIG.

In April last year, U.S. congressional budget analysts had estimated the net cost to taxpayers for the government's financial rescue program to be $356 billion.

The $89 billion estimate is also 42 percent less than the savings-and-loan crisis, the paper said.

The figure, however, does not include losses at Fannie Mae FNM.N and Freddie Mac FRE.N, which are projected to be $370 billion through 2020, the Journal said.

The officials see a profit of $8 billion from the Treasury's investment of $245 billion in banks, the paper said.

A Treasury official did not have immediate comment.

(Reporting by Paritosh Bansal; Editing by Diane Craft)