We may be witnessing the end of government bailouts as we know it.

The American International Group became a metaphor for the excesses of Wall Street. The global insurance giant found itself in this dire predicament by producing and marketing ill-conceived financial derivative products that were not properly regulated by federal authorities. The intricate and systemically fragile nature of these complex and opaque financial products metastasized throughout the global economic landscape.

The ensuing financial crisis devastated the world, severing more than $34.4 trillion of wealth off global equity markets valuations from the end of the third quarter of 2007 through the end of the first quarter of 2009 — a 54.6 percent decline to $28.6 trillion from $63 trillion, according to the Roosevelt Institute, a non-profit organization.

During this period, U.S. household wealth plummeted $13 trillion, or 19 percent — from $68 trillion to $55 trillion, according to the Federal Reserve Bank. In addition, nominal GDP contacted $500 billion, or 3 percent — from $14.8 trillion in the third quarter of 2008 to $14.3 trillion in the second quarter of 2009.

The Federal Reserve essentially took control of AIG by providing $182 billion in rescue funds, acquiring a 79.9 percent stake in the company, and replacing the chief executive officer. Despite this taxpayer support, the company issued executive bonuses of approximately $165 million and a bonus package for the entire firm of as much as $1 billion.

By the end of 2012, the U.S. government divested itself from AIG, receiving approximately $205 billion, generating a profit of nearly $22 billion.

In a recent class action lawsuit, plaintiff shareholders claimed the federal government intervention was illegal and sought $40 billion in damages. A recent ruling validated the unlawful nature of the governmental action, but the court awarded no damages. This plaintiffs plan an appeal.

Judge Thomas C. Wheeler of the United States Court of Federal Claims said the Federal Reserve did not have the legal authority to take executive control of the firm, since the Fed does not have jurisdiction over insurance firms. The repeal of Glass-Steagall in 1999 — which permitted insurance companies to engage the creation and marketing of financial products — created a regulatory vacuum for the financial business at AIG.

However, Judge Wheeler suggested this illegal activity actually added value to the firm, since the firm would have declared bankruptcy without any intervention. He therefore stipulated that the plaintiffs are not entitled to any monetary damages.

Supporting this notion, Wheeler cited John Studzinski, vice chairman of the Blackstone Group and an advisor to AIG, who advised the board of directors to accept the government’s offer of 20 percent equity in the company, since “20 percent of something [is] better than 100 percent of nothing.”

It seems the real victims of the AIG debacle are not the AIG shareholders: they are the world that suffered tens of trillions of dollars in lost wealth.

Judge Wheeler believes the banks were treated more favorably than AIG In fact, the Fed may have had more legal authority to intervene more forcefully with them.

While the Dodd-Frank financial overhaul legislation prohibits the Fed from assisting a single institution with capital injections, the new laws are ambiguous regarding equity stakes.

Notwithstanding this ambiguity, the future climate now favors less governmental intervention, since specific terms associated with tax payer subsidies may generate litigation.

As a result, untethered tax payer assistance of financial and non-financial corporations may be on the wane.

The real test is forthcoming, as hedge funds Pershing Square, Fairholme Funds and Perry Capital along with other investors await their day in court regarding government treatment of the Fannie Mae and Freddie Mac — mortgage companies that are now operated under the conservatorship of the Federal Housing Financial Agency.

These government sponsored entities received a federal cash infusion of over $200 billion after the financial crisis erupted, with a stipulation of a 10 percent dividend. In 2012, the terms of the agreement were amended: in lieu of dividend payments, the government would receive all the profits indefinitely. By the end of June, this figure may approach $230 billion.

These investors are staking a similar claim as that sought by the AIG shareholders.

We may be witnessing the failing of too big to fail.