AIG Dead, Other Banks in Twilight: Hendry

American International Group is being kept alive on artificial support from the government, and many other financial companies are in the same situation, Hugh Hendry, Chief Investment Officer at Eclectica, told CNBC.

AIG's board approved a new rescue package that also includes more lenient terms on a government investment in its preferred shares and a lower interest rate on a government credit line, two sources familiar with the matter told Reuters.

"I think it's rather a series of redundant thoughts, because AIG is really no longer with us," Hendry said when asked about the chances of success of a new bailout for the insurer. "AIG is a ward of the US government, AIG's executives were naughty. They wrote naked (credit default swaps) and in the process they bankrupted the business."

"We live in a very strange, twilight period where we pretend that a lot of these financial companies are still with us. I think the reality is they left the business last year," Hendry added.

Banks' stock prices show that the markets think many financial institutions are bankrupt and the big debate is really how we bring down the debt supporting these companies, he said.

"Nationalization really provides for an orderly liquidation for what are insolvent institutions and I think we have to be willing to have that discussion," Hendry said.

He likened the situation in financial markets to a meeting of Alcoholic Anonymous, where the first step to redemption is recognizing the problem.

"If we had governments actually saying listen, the financial sector is insolvent, we would be on the first positive step to moving way from that situation," Hendry said.

• Slideshow: Origins of the Financial Crisis ... Then and Now

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