That sale took place Friday.

The decline of U.S. ownership below 50 percent would trigger federal regulation, according to a bevy of securities analysts and industry lawyers, some of whom formerly worked at the Federal Reserve Board.

Federal regulation of AIG cannot not occur before the government's stake in AIG drops below 50 percent because the government cannot regulate something in which it holds a majority interest, according to various industry lawyers, some of whom have worked for federal financial service regulatory agencies.

Spokesman for the Fed would not confirm or deny it.

Under an amendment to the Dodd-Frank financial services reform law, if AIG is regulated as a thrift holding company, it would be subject to consolidated regulation by the Federal Reserve Board.

In a note to investors on Aug. 31, Ray Schoen of Washington Analysis, a buy-side securities analytical group which advises hedge funds and institutional investors, said that, “In short, the company is poised to face real regulatory supervision of its non-insurance financial business for the first time in its history.”

Schoen said that, “While Treasury's exit is certainly a long-term positive for AIG, “investors should be aware that federal regulation presents a litany of new restrictions for the company, including minimum leverage and risk-based capital requirements, as well as restrictions on dividend payments and share buybacks.”

The National Underwriter also published on Aug. 5, a story based on comments Robert Benmosche, AIG's president and CEO made at its Aug. 3 earnings conference call with analysts where it was said that AIG is preparing for federal regulation in addition to state regulation.

In its comments to security analysts that day, Benmosche added, “in a way, we see it as a big positive.”

Currently, the government owns 53.4 percent of AIG, according to an investor's note last week by John Nadel of Sterne Agee & Leach in New York.

If the Treasury Department is able to sell all of the shares (it seeks to sell at around $34 a share), it would retain approximately 23 percent of AIG.

The U.S. needs to average about $28.73 on the sales to break even on the stake it acquired as part of a 2008 bailout, not including unpaid dividends and fees, according to a study last year by the Government Accountability Office. The first two offerings were priced at $29 a share and the second two at $30.50 apiece.

According to Benmosche and the analysts, AIG will be subject to federal regulation both because it owns a savings and loan holding company based in Wilton, Conn. now regulated by the Fed, and/or through its designation by the Financial Stability Oversight Council as systemically significant.

AIG's thrift was formerly regulated by the Office of Thrift Supervision (OTS), and its non-insurance financial activities were supposedly under OTS oversight.

This article was originall posted at LifeHealthPro.com, a sister site of Credit Union Times.