The Treasury Department is selling today its remaining 16percent of American International Group common shares, putting anend to the government's 50-month shotgun financial tryst with theglobal insurer.

Industry officials, financial analysts and Washington insidersspeculate that Treasury's sale of its remaining 234 million commonshares of AIG through an initial public offering will set the stageon Thursday for designation of AIG as the first systemicallysignificant non-bank. That is expected to take place at a closedmeeting of the Financial Stability Oversight Council.

Washington Analysis, a buy-side analyst group, said in a weeklybulletin to subscribers Monday that the FSOC will likely have onits agenda whether to designate AIG, Prudential Financial andGeneral Electric as systemic significant non-banks.

However, other Washington officials say they expect only AIG tobe designated a SIFI at this meeting, with decisions on othernon-banks debated one-by-one into next year.

If AIG is so designated, it would be historic, marking the firsttime that an insurance company would be federally regulated.

Washington Analysis researchers say, however, that the exactdetails of what non-bank SIFI status will mean will not becomeclear until the Fed issues additional rules during 2013's firstquarter.

Such designations were created through provisions of theDodd-Frank financial services reform act of 2010. Under the law,the Federal Reserve Bank would be the consolidated regulator ofAIG, but the states would still oversee its insurance-operatingsubsidiaries.

The 234.2 million shares of AIG were priced last night at$32.50, according to AIG. When the deal closesFriday, Treasury will have sold the last of its remainingshares of AIG common stock, receiving proceeds of approximately$7.6 billion from the sale, AIG said.

The closing of this transaction will mark the full resolutionof America's financial support of AIG. After the closingof today's offering, Treasury will continue to hold warrants topurchase approximately 2.7 million shares of AIG common stock – thesale of which is expected to provide an additional positive returnto taxpayers.

Since September 2008, America committed a total of $182.3billion in connection with stabilizing AIG during the financialcrisis.  Since then, through asset sales and other actionsby AIG, America has not only recovered all $182.3 billion but alsoearned a combined positive return of $22.7 billion. 

"We are very pleased to repay 100 percent of allthat America invested in AIG plus a totalcombined positive return – or profit – of $22.7 billion," said AIGPresident and Chief Executive Officer Robert H. Benmosche. "Onbehalf of the 62,000 employees of AIG, it is my honor and privilegeto thank America for giving us the opportunity to keep our promiseto make America whole on its investment in AIG plus a substantialprofit.  Thank you America. Let's bring on tomorrow."

Bank of America Merrill Lynch, Citigroup, Deutsche BankSecurities Inc., Goldman, Sachs & Co. and J.P. MorganSecurities LLC have been retained as joint book runners for theoffering, Treasury says.

The Treasury, the Federal Reserve Board and the Federal ReserveBank of New York became involved with AIG in September 2008 when aunit of AIG's holding company, AIG Financial Products, had issuedcredit default swaps on what was later learned to be $2.77 trillionof securities and synthetic securities backed by mortgages ofvarying quality.

As the value of the underlying securities declined, and AIG'scredit rating was lowered by rating agencies, the terms of the CDSrequired AIG to put up collateral. AIG became unable to raise thecash to meet such margin calls.

After several banks declined to provide a private-sectorsolution, the NY Fed provided an initial $85 billion in cash inexchange for 79.9 percent of AIG's stock.

The NY Fed, in tandem with the Federal Reserve Board and theTreasury departments of the Bush and later Obama administrations,ultimately invested more than $100 billion in additional funds.

The sale, if completed, would end several controversial andtense chapters in the life of Timothy Geithner, who is expected toleave his role as Treasury secretary early next year.

Geithner was president of the NY Fed when the Federal ReserveBoard was told by Henry Paulson, then secretary of the Treasury inthe Bush administration, to rescue AIG.

Besides dealing with the huge liability from the CDS, laterinvestigations by the Government Accountability Office and thePennsylvania Insurance Department found that AIG's insurancesubsidiaries, both life and property and casualty, hadcross-guaranteed the liabilities of AIGFP.

Among the issues that surfaced during the government's rescuewas the fact that AIG officials who had led the company astray,including those in London who had devised the CDS investment, wereowed more than $100 million in bonuses.

The political solution that resulted was a reduction in theamount of bonuses paid as well as a system overseen by attorney KenFeinberg that limited the bonuses companies receiving federal aidcould pay their employees.

Indeed, Benmosche said one of the reasons he wants the federalgovernment to divest itself of a financial interest in AIG is to berid of the limits on executive compensation imposed on those whoreceived bailouts in the 2008-2010 period.