If the shares are all sold after the sale, the government’s ownership of AIG will fall to 77% from 92%.

The US government is planning to sell some 200 million AIG shares at $29 each, totalling $5.8 billion. It could make up to $7.1 billion if Wall Street banks buy more shares from the US Treasury.

Treasury secretary Tim Geithner explained in a statement:

Today’s announcement represents and important milestone as we continue to exit our stake in AIG. The decision to provide this assistance was exceptionally difficult, but it’s clear today that it was essential to stopping a financial panic, preventing a severe economic collapse, and helping American jobs.

During the financial crisis of 2008 the US government ploughed AIG with cash injections which totalled $180 billion.

It was widely criticised at the time, as taxpayers resented having to foot the bill for what they perceived as Wall Street excess.

The government is estimated to have paid around $28.73 for each share of AIG at the time and so Tuesday’s share sale translates into a profit of $0.27 per share for the Treasury and by extension, the taxpayer.

The insurance giant managed a profit of $269 million in the first quarter of 2011 compared with the $1.8 billion it made a year earlier. It had been hurt by a $1.7 billion payout for disasters including Japan’s earthquake and the tsunami in March.

Basically, if everything goes according to plan, there should be some fist pumps and high fives.