If you don’t know the old punchline, “Hey, It’s your turn in the barrel today!” you might not fully understand how badly we view the news out of American International Group Inc. (NYSE: AIG) today. We applaud the insurance giant for paying back Uncle Sam and the taxpayers with a profit after its bailout. Unfortunately, the headline today is just not going to be received well by the public, even if it is really an opportunity to make money.

AIG released a press release showing that its Connective Mortgage Advisory Company is “drawing on the company’s investment expertise and United Guaranty’s mortgage insight” for the purchase of residential mortgages for investments. The company said:

AIG announced today it has launched a new business unit called Connective Mortgage Advisory Company. The new company, which recently facilitated AIG’s first correspondent mortgage purchase, draws upon AIG’s investment expertise and the experience of its mortgage insurance subsidiary, United Guaranty Corporation, to identify and buy residential whole loan mortgages as investments.

The new Connective unit is focused on identifying residential first-mortgage loans to be purchased as long-term investments for AIG. As a part of the terms for the loans to purchased as investments, AIG will manage the loan-servicing component. The reality is that AIG can easily handle this. The public perception of this, however, is likely to be far different. The problem is that AIG effectively blew itself up and was a major contributor of what would have blown up so many other financial giants during the recession had it not been for the billions and billions of taxpayer bailout dollars.

AIG maintains in this release that direct investment in residential mortgage loans “offers attractive investment returns and enables a proactive approach to managing mortgage risk.” Again, our concern is not really whether AIG can manage this. Our concern is that the public will ask, “Isn’t that sort of why we bailed them out just a few years ago?” Whether the insurance giant created a hole worth endless of billions by insuring and participating in mortgages, CDOs and other securitizations may get lost in the shuffle here in what is, by and large, a liberal media that does not really like Wall St. and those who create wealth merely from financial dealings. Here is the supporting data offered by AIG:

Over the past several years, United Guaranty has been using a multivariate risk-assessment model to determine the quality of individual loans in the pricing of its mortgage insurance. United Guaranty is contributing deep knowledge of the residential mortgage landscape to the Connective project. “With the support of AIG, United Guaranty became the mortgage insurance market-share leader with risk-based pricing products,” said Donna DeMaio, United Guaranty’s Chief Executive Officer. “United Guaranty’s understanding of residential mortgage markets combined with AIG’s investment expertise creates unique new investment opportunities for AIG.”

AIG said that the Connective unit will establish correspondent relationships with lenders and will underwrite loans, and that it will provide support throughout the loan purchase process. It also said that all mortgage purchases will be subject to rigorous underwriting and risk management standards.

Here is where the difference from the past comes into play: There are no plans for Connective to conduct any direct lending or securitization. Our problem with today’s news is that the public is still too rattled to hear that AIG is getting more active in another major aspect of the public’s finances, even if this is different from what really blew up the company.

The reality is that the public no longer owns AIG. Reality and perception may differ. As CEO Robert Benmosche has indicated previously, the company just cannot get involved in certain things (like suing the government over the bailout terms) because of the public perception. The public perception by many is still that AIG owes the public, even if that debt is merely a moral one.

It is one thing for AIG to actually do this new mortgage investing initiative. It is quite another thing to telegraph the launch of this new initiative. Perhaps AIG should have just launched this new mortgage effort without formally announcing it.

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