The Financial Times reported today that AIG is set to complete a restructuring plan that would eventually lead to the government liquidating ownership in the firm.

In typical form this would be more complex, involving the U.S. Treasury increasing its ownership stake to 90% from 80% before unwinding completely. According to the FT the Treasury would convert $49 billion in preferred shares to common shares — that is what would up its total — before selling those common shares over a period of time.

 The problem is such a move would dilute shares, as if AIG shareholders hadn’t been diluted enough (see AIG chart below). According to the FT the Treasury would account for this by offering warrants that would allow outside shareholders the right to buy AIG stock in the future at a discount to the current price.

None of these plans are official or have been confirmed and would have to be approved by the AIG board once there is a plan. The idea would be to repay taxpayers for the $182 billion in public money use to save AIG.

The problem is and always has been that AIG was not being saved, it was their counterparties being saved, the investment banks who were being saved concurrently with TARP funds. Goldman was being paid out on both ends and has returned to profitability and large bonuses, which is more than AIG shareholders and the rest of us have gotten. It would be good to remember that when politicians begin talking about the success of TARP and how the banks have paid back loans.

The story concludes that bankers, regulators and insiders involved are surprised at the resilancy of the stock. Huh. Take another look at the chart. In June 2009 AIG did a 1-20 reverse stock split, meaning the current price is under $2, based on previous values. Dilute away.