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FIRST ON CNBC: CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO SITS DOWN WITH RETIRED AIG CHAIRMAN & CEO HANK GREENBERG TODAY ON "SQUAWK ON THE STREET"

WHEN: TODAY, TUESDAY, SEPTEMBER 16

WHERE: CNBC'S "SQUAWK ON THE STREET"

Following is the unofficial transcript of a FIRST ON CNBC interview with retired AIG Chairman & CEO Hank Greenberg today on CNBC's "Squawk on the Street." The interview will continue on CNBC's "Closing Bell with Maria Bartiromo" at 4PM ET today.

All references must be sourced to CNBC.

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HAINES: WE ARE BACK WITH RETIRED CHAIRMAN & CEO HANK GREENBERG WHO SPENT NEARLY 40 YEARS BUILDING AIG. IT'S THE WORLD'S LARGEST INSURANCE COMPANY. A $300 MILLION FIRM WHEN HE GOT THERE. AIG NOW OPERATES IN OVER 130 COUNTRIES AND AT ITS PEAK IT WAS WORTH NEARLY $190 BILLION. MR. GREENBERG, FIRST ON CNBC WITH OUR MARIA BARTIROMO.

BARTIROMO: WE ARE LOOKING AT A TRAGIC SITUATION IN AIG THE STOCK OPENING AT UNDER $2 A SHARE. LET ME BEGIN BROADLY ON THE IMPORTANCE OF AIG, REALLY TO THE REST OF THE FINANCIAL SYSTEM AND FROM A SYSTEMIC PERSPECTIVE. CAN YOU EXPLAIN TO US THE AMOUNT OF RISK AIG IS FACING AND WHY THIS COMPANY IS SO IMPORTANT TO THE REST OF THE FINANCIAL SYSTEM.

GREENGERG: WELL, FIRST OF ALL, AIG IS A GLOBAL COMPANY. IT IS IN OUR NATIONAL INTEREST THAT AIG WILL SURVIVE. IT'S IN 130 COUNTRIES, THERE'S NO COMPANIES LIKE IT IN THE WORLD. THAT'S WHY IT IS A NATIONAL INTEREST.IT'S OPEN MARKETS THAT WERE CLOSED BEFORE. AND IT IS REALLY A NATIONAL TREASURE. TO PERMIT AIG TO GO DOWN, NOT BECAUSE IT'S INSOLVENT, BECAUSE IT HAS A LIQUIDITY ISSUE AND LIQUIDITY CAN BE RESOLVED. THERE'S OVER ABOUT A TRILLION DOLLARS OF ASSETS IN THE COMPANY. SO GIVE IT SOME TIME. IT COULD RAISE MORE FUNDS AND SELL ASSETS. THAT WOULD BE IN OUR NATIONAL INTEREST. LET ALONE THE 100,000 OR MORE EMPLOYEES EMPLOYED BY THEM ALONE AND THE FACT THAT IT AFFECTS REALLY EVERYTHING IN THE WORLD. IT AFFECTS THE AIRCRAFT INDUSTRY, INDUSTRIALS, INDIVIDUALS, LIFE INSURANCE, EVERYTHING.

BARTIROMO: THE COUNTER PARTIES THAT YOU MENTIONED ON THE OTHER SIDE OF THE FINANCIAL INSTRUMENTS WHETHER ITS CREDIT SWAPS OR ANY OTHER FINANCIAL INSTRUMENTS YOU ARE TALKING ABOUT WHAT ARE THE CONSEQUENCES OF AIG BANKRUPTCY?

GREENBERG: WELL IF AIG DECLARED BANKRUPTCY COUNTER PARTIES ARE GOING TO EACH HAVE A PROBLEM, IT'S GOING TO BE SYSTEMIC. AND THEY'RE GOING TO HAVE TO UNWIND THAT TRANSACTION, THEY'REGOING TO GET IN LINE WITH EVERYBODY ELSE.IT WILL BE YEARS BEFORE THAT IS SORTED OUT. IT'S AS COMPLEX AS COULD BE. IT SEEMS TO ME IT'S SO MUCH MORE SIMPLE TO SOLVE THIS PROBLEM WHERE HEALTHY COMPANIES FINANCIALLY EXCEPT FOR LIQUIDITY IS GOING TO BE PERMITTED TO GO DOWN. THAT DOESN'T MAKE ANY SENSE.

BARTIROMO: AND YOU MAKE A GOOD POINT SAYING THIS IS NOT A SOLVENCY ISSUE BUT A LIQUIDITY ISSUE.

GREENBERG: ABSOLUTELY.

BARTIROMO: WHERE DOES THIS LIQUIDITY COME FROM? TELL ME YOUR SOLUTION.

GREENBERG: IF YOU HAVE TIME. IF THE RATING AGENCIES WOULD BE HELD IN ADVANCE FOR 90 DAYS, YOU COULD DO A RIGHTS OFFERING. YOU CAN GO TO THE WEALTH FUNDS FROM AROUND THE WORLD. AND I THINK MANY WOULD RESPOND UNDER THE RIGHT CIRCUMSTANCES, WITH THE RIGHT PLANS. YOU COULD SELL ASSETS. THERE ARE LOTS OF ASSETS TO BE SOLD. THE MIX OF ASSETS CHANGE FROM TIME TO TIME. WHAT WAS THE MIX OF ASSETS IN AIG, SAY FIVE, SIX, SEVEN YEARS AGO, IS NOT NECESSARILY A MIX YOU WOULD WANT TODAY. BUT THE WORLD IS CHANGING.AND YOU CHANGE ACCORDINGLY. AND SO YOU CAN WORK YOUR WAY OUTOF THIS PROBLEM GIVEN SOME TIME.

BARTIROMO: LET'S TALK ABOUT THE ASSETS THAT POSSIBLY COULD RAISE ENOUGH CAPITAL HERE. IF AIG DOES NOT GET HELP, LET'S SAY FROM THE INVESTMENT BANKS TRYING TO COME UP WITH THIS $75 BILLION WHICH I WANT TO ASK YOU ABOUT IN A MOMENT. WHAT CAN AIG DO, WHAT BUSINESSES DO YOU THINK IT SHOULD BE SELLING?

GREENBERG: IT'S A NUMBER OF BUSINESSES, THE AIRLINE LEASING COMPANY IS VERY DESIRABLE. THEY CAN'T OPERATE WITHIN AIG TODAY GIVEN THAT THE BORROWING COSTS NOW FOR IOC IS ABOUT 10% OR HIGHER. THAT IS IMPOSSIBLE. BUT THERE ARE LOTS OF OPPORTUNITIES TO RESTRUCTURE AND SELL MAJOR PARTS OF ILFC THAT WOULD BE VERY DESIRABLE. THAT'S ONE ASSET. YOU CERTAINLY COULD SELL THE TRANS-ATLANTIC REINSURANCE COMPANY WHICH IS NO LONGER NECESSARY IN AIG.YOU COULD SELL PART OF THE DOMESTIC LIFE OPERATION.THERE ARE MANY AREAS THAT YOU COULD SELL. THE ASSET MANAGEMENT BUSINESS, IT'S NOT NECESSARY FOR AIG.

BARTIROMO: WHAT KIND OF CAPITAL ARE WE TALKING ABOUT WITH THE SALES OF THESE BUSINESSES POTENTIALLY?

GREENBERG: IT DEPENDS IF YOU'RE FORCED TO HAVE A FIRE SALE, LIKE A YARDSALE, YOU'RE NOT GOING TO GET TOP PRICE, SO YOU NEED SOME PATIENCE IN ORDER TO SELL SOME OF THESE, BUT OVER A PERIOD OF TIME YOU PROBABLY COULD SELL ABOUT $20 BILLION OF ASSETS AND WITH THE $20 BILLION IN NEW YORK STATE THAT THE GOVERNOR HAS MADE AVAILABLE IN THE REGULATORY CHANGE.

BARTIROMO: FROM THE SUBSIDIARIES?

GREENBERG: YES.THEY'RE WORKING FINE, THE SUBSIDIARIES, THE INSURANCE COMPANIES ARE DOING FINE. THEY COULD DO BETTER.BUT THEY'RE DOING FINE.

BARTIROMO: IN OTHER WORDS IF I'M A CUSTOMER OF AN INSURANCE COMPANY AND I'VE GOT A HOME INSURANCETHERE, CAR INSURANCE WHATEVER, I'M NOT IMPACTED, THAT BUSINESS IS FINE, IS WHAT YOU'RE SAYING?

GREENBERG: YES WORLD WIDE, IT'S GLOBAL.AND SO BUSINESSES ARE DOING FINE. BUT THERE'S NO ORGANIZATION IN THE WORLD THAT HAS THE SPREAD OF RISK IN ITS BUSINESSES THROUGHOUT THE WORLD THAT AIG DOES.IT'S OPEN MARKETS THAT WERE NEVER OPEN FOR ANYBODY BEFORE. IT'S THE PATH FINDER, THAT'S WHY IT IS A NATIONAL ASSET. IT'S A NATIONAL TREASURE.LETTING IT GO DOWN WOULD BE A DRAMATIC MISTAKE.

BARTIROMO: IT'S THE UNREGULATED PART OF THE BUSINESS THAT IS REALLY THE PROBLEM HERE AND THAT IS THE CREDIT DEFAULT SWAPS AND THE OTHER FINANCIAL INNOVATIONS, LET'S TALK ABOUT THE DOWNGRADES LAST NIGHT FROM S&P, MOODIES AND FITCH. HOW SIGNIFICANT ARE THE DOWNGRADES WE'RE STILL TALKING ABOUT THE DEBT BEING AT INVESTMENT GRADE. BUT HOW WILL THE COMPANIES' ABILITY TO OPERATE CHANGE AS AS A RESULT OF THOSE DOWNGRADES LAST NIGHT?

GREENBERG: THEY'RE GOING TO BE REQUIRED TO PUT UP MORE COLLATERAL AND THE COUNTER PARTY ALSO NOT WANT TO DO BUSINESS UNLESS THEY ARE ADEQUATELY CLAL CENTRALIZED.SO THAT DOES CREATE A PROBLEM. BUT AS I SAID, I THINK IF THERE IS A BRIDGE LOAN, AN INTERIM BRIDGE LOAN THAT CAN BE WORKED OUT, THE COMPANY CAN SURVIVE.NOT ONLY SURVIVE, IT WOULD PROSPER. IN MY JUDGMENT, THERE IS NO -- THERE WILL NEVER BE AN ORGANIZATION GLOBALLY IN THE INSURANCE BUSINESS LIKE AIG. THERE WILL NOT BE.AND THAT IS A LOSS TO AMERICA, TO THE UNITED STATES.

BARTIROMO: MORE THAN A TRILLION DOLLARS IN ASSETS, 130 COMPANIES OPERATING AROUND THE WORLD.NOW YOU'RE SAYING A BRIDGE LOAN,YOU WOULD LIKE THE FED TO MAKE AVAILABLE A BRIDGE LOAN IS WHAT YOU'RE SAYING?

GREENBERG: WHAT I'M SAYING IS IF YOU CAN'T RAISE IT ANY OTHER WAY IN THE PRIVATE SECTOR, THEN THE FEDSHOULD MAKE THAT BRIDGE LOAN.IT'S NOT A GIFT, AND IT'S NOT A BAILOUT. BECAUSE IT'S A SOLVENT COMPANY. IT HAS A CASH PROBLEM CURRENTLY. THAT'S DIFFERENT THAN MANY OTHER TYPES OF BAILOUTS THAT HAVE BEEN TALKED ABOUT. AND THEY WILL SELL ASSETS OVER AREASONABLE PERIOD OF TIME. AND THEY'LL WORK THEIR WAY OUT OF THIS PROBLEM. BUT YOU NEED SOME CONFIDENCE.IF YOU DON'T HAVE CONFIDENCE IN A FINANCIAL MARKET, THEN YOU'VE DESTROYED THE MARKET.

BARTIRMO: WHAT ABOUT THE CRITICS WHO MIGHT SAY, LOOK, THE FED CAN'T ALWAYS BE THERE TO SAVE COMPANIES, THEY DID IT FOR FANNIE AND FREDDIE AND PAULISON WANTED A BAZOOKA ON HIS SHOULDER. THEY COMPARE IT TO SEVERAL SITUATIONS.

GREENBERG: I THINK IT'S DIFFERENT, THIS IS A MUCH DIFFERENT SITUATION, FIRST OF ALL, THIS IS A MUCH BIGGER COMPANY AND IT'S NOT AN INSOLVENT COMPANY.WE HAVE GOT TO KEEP THAT IN MIND, IT'S NOT AN INSOLVENT COMPANY THAT'S THE DIFFERENCE. THE FED SHOULD BE THERE ARE TO ISSUES LIKE THAT.

BARTIROMO: HAVE YOU TAKEN THESE IDEAS TO THE CURRENT CEO OF AIG?

GREENBERG: LOOK, I HAVE REACHED OUT TO WILLUMSTAD SEVERAL TIMES BUT THERE HAS BEEN VERY LITTLE RESPONSE.

BARTIROMO: IN OTHER WORDS THEY'RE TELLING YOU -- WHAT ABOUT THE BOARD? WHAT HAS THE BOARD SAID?

GREENBERG: I HAVEN'T TALKED TO THE BOARD. THEY HAVEN'T INVITED ME TO TALK TO THEM.

BARTIROMO: AND YOU HAVE CALLED WILLUMSTAD AND PUT YOUR POSITIONS ON THE TABLE AND HE HAS SAID HE DOESN'T NEED YOUR HELP?

GREENBERG: HE SAYS YES, HE WANTS HELP, BUT NOTHING EVER HAPPENS. IT JUST -- IT DIES RIGHT THERE.

BARTIROMO: HANK, THERE ARE A FEW PEOPLE WHO UNDERSTAND THE COMPLEXITIES OF THIS BALANCE SHEET AS WELL ASYOU DO.DO YOU BELIEVE AIG WILL GO BANKRUPT?

GREENBERG: IF THEY DON'T GET IF THEY DON'T GET A BRIDGE LOAN FROM EITHER THE PRIVATE SECTOR OR THE FED OR THERE'S A SUDDEN -- A SUDDEN APPEARANCE OF WEALTH FUNDS WILLING TO INVEST, AND IF THE RATING AGENCIES DON'T GIVE THEM BREATHING SPACE, THEN THERE'S NO ALTERNATIVE. AND THAT WOULD BE A DISASTER.

BARTIROMO: HANK, THIS COMPANY HAS SEEN THE VALUE, OBVIOUSLY, PLUMMET, LOSING $180 BILLION IN MARKET VALUE. HOW SIGNIFICANT HAS YOUR LOSS BEEN PERSONALLY?

GREENBERG: VERY SIGNIFICANT. MOST OF MY NET WORTH WAS IN AIG,YOU KNOW, SOMETHING I BUILT FROMTHE BEGINNING, AND I NEVER BELIEVED IT WAS POSSIBLE FOR AIG TO BECOME IMPAIRED, EVER.

BARTIROMO: WHAT ABOUT C.B. STAR?

GREENBERG: C.B. STAR HAS AIG SHARES. WE DIVERSIFIED SOME.

BARTIROMO: SO YOU HAVE SOLD SOME STOCK.

GREENBERG: YES, OVER THE YEARS. OVER THE YEARS.

BARTIROMO: WHAT DO YOU THINK WENT WRONG, HANK? HERE'S A COMPANY THAT OBVIOUSLY HAS FALLEN DRAMATICALLY, YOU RESIGNED 3 1/2 YEARS AGO. FROM YOUR PERSPECTIVE, WHAT HAPPENED?

GREENBERG: I THINK SEVERAL THINGS. I THINK RISK MANAGEMENT CONTROLS EITHER DISAPPEARED OR WERE WEAKENED. THERE WASN'T ATTENTION BEING PAID TO THE ACCUMULATION OF RISK. I THINK THERE WAS A -- A DETERMINATION TO GROW WITHOUT THE RIGHT CONTROLS IN THE FINANCIAL SECTOR OF THE BUSINESS. MANY THINGS WENT WRONG IT'S A TRAGEDY, IT DIDN'T HAVE TO HAPPEN.

BARTIROMO: HAVE YOU SPOKEN TO MARTIN SULLIVAN, THE FORMER CEO?

GREENBERG: NO, NO.

BARTIROMO: WE'RE GOING TO CONTINUE OUR CONVERSATION FOR THE "CLOSING BELL" PROGRAM, BUT WE'LL LEAVE IT THERE FOR THIS LIVE INTERVIEW. THANK YOU SO MUCH, FORMER CHAIRMAN AND CEO OF AIG.


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