Moodys think so. Reuters reports that the rating agency appears to be impressed with AIG's restructuring plan, saying that the insurer will likely be able to repay its entire government loan and a great deal of the equity stake. That's pretty impressive, considering how much it owes -- up to $180 billion, which includes around $80 billion loans. Is Moodys being a little too optimistic? It depends.

Reuters says:

The restructuring plan still relies heavily on government support, but if AIG's operations and global financial markets continue to stabilize, the company can likely generate enough value to repay the government, Moody's said in a statement.



Moreover:

"We believe that the slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales," Moody's said.



The latter comment appears to be almost obvious: the longer the government holds on to AIG, the more its business portfolio will be worth. Even though the economy has improved, anyone looking to acquire one of AIG's businesses in the near-term would likely be looking for near fire sale prices, as most still consider the firm a lost cause. But as the government continues to support it, and its earnings improve, those businesses will show their endurance and increase in value.

Maybe.

In theory, if only the groups that created the vast majority of AIG's loses were eliminated, AIG would eventually, one day, be able to pay back the government in full. After all, AIG isn't like GM or Chrysler -- prior to the financial crisis it had a track record of good profitability for the past several decades. So the idea that it could set aside a portion of future profits, which should continue as before, to pay back the government seems almost trivial. It might take a while, but as long as AIG is profitable, it can slowly pay back the government.

But it isn't quite so simple -- there's an obstacle. AIG's problem is similar to the one faced by the bailout banks, which I wrote about last week. As long as the government restrains its compensation practices, it might have trouble hanging onto its best people. As talent departs, the likelihood of its survival diminishes.

It's easy to criticize AIG as a firm that deserves to fail. That's probably true. But meanwhile, taxpayers will be on the hook for many billions if it turns out to ultimately crumble. And other than some very stupid bets by a small part of the firm, its larger business model was sound. So, yes, if left to pursue its businesses that didn't screw up, there's a chance that taxpayers could get its money back. I'm just a little skeptical that the government's tactics in controlling the firm will allow that to happen.

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