Greenberg: AIG Has Lost Its Way, Needs to Be Rebuilt
AIG shares slumped to an all-time low in New York trade Tuesday, down 12 percent to close at $1.08. Just a year ago, AIG shares were trading north of $55. Traders were responding to concerns the insurer could need a bigger bailout than the $150 billion it's already received in total support from the U.S. government.
Hank Greenberg, chairman and CEO at C.V. Starr and Co. and former CEO of AIG, told CNBC's Asia Squawk Box that it's clear AIG is more than a troubled company.
"They've really lost their way. Clearly there's a seriously issue and it's hard for me to understand. AIG was the largest most successful insurance company in history ... it's hard to understand how it could fall off a cliff that quickly and that far," Greenberg said.
When asked about the government taking an 80 percent stake in AIG—effectively nationalizing it—and its subsequent 8 percent stake in Citigroup, Greenberg felt that the discrepencies were due to the quick turnaround in the AIG deal.
"AIG ran out of cash and went to the government at the last minute. It was a liquidity problem and not a solvency problem at the time. The terms of the original funds they borrowed were so draconion that they finally had to change that, but the left the 80 percent ownership with the government," Greenberg said.
(Watch the full Hank Greenberg interview on the left)
Greenberg had this to say about the future of AIG. "There has to be another change if you're going to save AIG and pay back the taxpayer, which I think is essential. You can't sell many assets in this market today. You can't sell parts of AIG around the world because companies don't have the money and you'll never get fair value for what you're trying to sell. That is not the solution."
Greenberg feels that the solution is to rebuild AIG. "If you destroy AIG, it will never become a tax payer or an employer. I think it can be done."
Greenburg hasn't decided whether he's interested in any potential AIG assets if indeed they go on sale. But he does think it would be a mistake if AIG sells its wholly-owned Chinese subsidiary, AIA.
"It is the only foreign company that is 100-percent owned and operated in China. There are no others like it. (To sell it ) would be a big mistake. The solution is to rebuild AIG. The government has to change it's ownership from from 79.9 percent to say 15 percent or under. The loan has got to be extended in duration so that you're not trying to pay it off in a quick period of time, because you can't," Greenberg emphatically stated.