If AIG sells off its best parts, what will remain?

American International Group (AIG), the much-battered insurance company that seems to have become a flailing symbol of the bailout, faces failure. I'm not sure if this news depresses me or if it angers me -- well, actually I do know, but I first felt a slight pang of sorrow for the firm.

The main reason for the impending doom of AIG is the fact that the company is slowly selling off its moneymaking businesses in order to pay off the $130 billion it borrowed from the government during the bailout. Honestly, the company has to sell off its moneymakers (sorry Black Crowes), because they are the only portions of the company that will sell. In fact, some analysts think that AIG is giving up "too much" in order to survive on its own.

Unfortunately, this is the only choice AIG has. As I just asked, who is going to buy a part of AIG that isn't making money? Hold on, that question has received a bit of an answer -- the government may buy them on behalf of the taxpayers, right?

Seriously, the government may be willing to purchase some of the parts of AIG that aren't making money -- this was the step taken during the bailout. And what return are we getting on the investment? Zero, zip, nada, bupkis.

Of course, this situation also raises a question about the management (or should I say the mismanagement?) at AIG. When the government stepped in and bailed out the struggling insurer, did AIG think that they would be able to pay back the government by selling the weak parts of its operations? Julie Grandstaff, managing director of StanCorp Investment Advisers noted the the plan "has been, since the first days of the bailout, to sell off the crown jewels, including its investment arm and very strong insurance units, because that's all the market will accept now." In fact, Grandstaff notes that the "only way to save the organization ... will be a freestanding AIG in the end."

I hate to break it to you folks, but there won't be a freestanding AIG in the end. In fact, there won't be AIG when all the dust settles -- and the dust may just be the remains of any taxpayer dollars burning in the rubble.

According to the article, it appears that only AIG's domestic life insurance and retirement company, and a handful of subsidiaries, will stand. The problem is presented by Stewart Johnson from Philo Smith & Co.: "In today's environment, the only thing that will sell are self-supporting entities ... Those that AIG is having difficulty selling, there's a reason for that. But if they can only sell things that stand on their own, what are they left with?" I can tell you what they will be left with, nothing. And taxpayers? They, I mean WE, will be left holding the bag.

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