By Nick Baker March 9 (Bloomberg) — American International Group Inc. surged, leading gains by financial companies bailed out by the U.S. government, on speculation the insurer will sell more assets after raising $51 billion through deals. AIG jumped 13 percent to $32.77 at 4 p.m. in New York. Citigroup Inc. advanced 7.3 percent to $3.82 as Charles Gasparino of Fox Business Network said the U.S. may sell its stake in the bank within three months, without saying where he got the information. Fannie Mae climbed 5.9 percent to $1.07, and Freddie Mac increased 7.6 percent to $1.28. The government saved AIG, Citigroup, Fannie Mae and Freddie Mac after Lehman Brothers Holdings Inc.’s collapse intensified the credit crisis in September 2008. AIG sold two divisions in the past two weeks as it seeks to repay the U.S. Citigroup has returned some assistance, and the government plans to sell its remaining stake in the next year. President Barack Obama ’s administration is still trying to sort out what to do with Fannie Mae and Freddie Mac. “You don’t know what the government might do across the board, good or bad,” said Anton Schutz , who manages $225 million of financial stocks at Mendon Capital Advisors Corp. in Rochester, New York. “And anybody who chooses to short these things can really get squeezed.” Short Sales Short sellers closing their bearish bets may also be driving up the stocks. For AIG, 26 percent of its shares available for trading are sold short, according to data compiled by Bloomberg. If it were still in the Standard & Poor’s 500 Index , it would be the third most-shorted among the measure’s 500 companies. With Fannie Mae and Freddie Mac, short sales comprise more than 10 percent of their float. The ratio is 2.5 percent at Citigroup. Short selling is the sale of borrowed stock in the hope of profiting by buying the securities later at a lower price and returning them to the shareholder. Barclays Plc, based in London, is interested in purchasing a U.S. retail bank to obtain more deposits and expand Barclays Capital, the Wall Street Journal reported, citing unidentified people close to the situation. New York-based Citigroup is the third-largest U.S. bank by assets, trailing Bank of America Corp. and JPMorgan Chase & Co. Top Fund Manager Bruce Berkowitz , named money manager of the decade in the U.S. stock-fund category by Chicago-based research firm Morningstar Inc., recently bought $700 million worth of Citigroup shares, Fortune magazine reported on its Web site. Berkowitz said the worst is over for the bank. Fannie Mae of Washington and McLean, Virginia-based Freddie Mac both help provide liquidity for the U.S. mortgage market by purchasing loans. Shares of New York-based AIG reached $34.80, the highest intraday price since November. “If you’re a trader, the stock’s up 10 percent, almost 11 percent — why not day-trade this?” Robert Pavlik , who helps oversee $400 million as chief market strategist at Banyan Partners LLC, said before AIG extended its gain to 20 percent. “But for an investment, I wouldn’t go near it.” To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net .
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