Today, American International Group (AIG) CEO Peter Hancock told investors and journalists that AIG corporate leadership would not support a plan proposed by shareholder activist Carl Icahn to break up the company into three insurers. Hancock said in a conference call that “Management and the board have carefully reviewed such a separation on many occasions, including in the recent past, and have concluded it did not make financial sense.”

The plan by Icahn comes as AIG misses earnings expectations and is going through a restructuring that is reportedly expected to eliminate hundreds of senior jobs at the company. AIG has been particularly hard hit by a 41% drop in the firm’s insurance income.

While the accuracy of Icahn’s claim about profitability from splitting up AIG is far from settled, the public interest in breaking up AIG could not be clearer.

AIG spent the first decade of the 21st century paying fines for criminal conduct — 2004, 2005 — before becoming ground zero for the 2008 financial crisis due to company’s fraudulent and manifestly irresponsible conduct related to the mortgage securities market.

AIG insured against the default of mortgage securities beyond the value of the firm itself despite promising the firm would not lose even “one dollar.” That claim only became technically true because when the bets went bad the firm received bailouts from the Federal Reserve and Treasury Department that totaled $180 billion, the largest financial bailout in US history. AIG used an estimated $1.2 billion of the bailout to give bonuses to its executives.

The public justification for the historic bailout by regulators was that AIG was “Too Big To Fail,” that the company’s collapse would bring down the entire financial system due to its size. A bank or financial firm can, theoretically, become large enough to pose a systemic risk to the entire financial system if it fails.

Now, size is what AIG management is fighting to preserve. Apparently, it does not make “financial sense” to AIG leadership for the company to become small enough to succeed or fail on its own. Why give up a bailout guarantee?

Despite the passage of Dodd-Frank and the creation of a Financial Stability Oversight Council, none of the Too Big To Fail banks and financial firms have been broken up. If another crash happens, experts believe the government will, once again, bail out Wall Street. [PDF]