CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO INTERVIEWS CV STARR & CO. CHAIRMAN & CEO HANK GREENBERG ON CNBC'S "CLOSING BELL" TODAY
WHEN: Today, Friday, November 7th at 4:15 PM ET
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with CV Starr & Co. Chairman & CEO Hank Greenberg, on CNBC, airing on "Closing Bell"
All references must be sourced to CNBC.
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MARIA BARTIROMO: JOINING ME NOW IN AN EXCLUSIVE INTERVIEW TO TALK ABOUT HIS PLAN TO SAVE THE INSURANCE GIANT, HANK GREENBERG CHAIRMAN AND CEO OF CVSTAR & CO. AND FORMER CHAIRMAN & CEO OF AIG WHO REALLY BUILT THIS COMPANY. HANK, THANK YOU FOR JOINING US. GOOD TO HAVE YOU ON THE PROGRAM. I KNOW THAT YOU HAVE BEEN REACHED OUT A NUMBER OF TIMES TO ED LIDDY, THE NEW CEO OF AIG, AND YOU HAVE BEEN REACHING OUT TO TRY AND GET THESE TERMS CHANGED. WHAT KIND OF A RESPONSE HAVE YOU GOTTEN?
HANK GREENBERG: WELL, I THINK THAT THE FED AND TREASURY RECOGNIZE THAT THE TERMS ARE SO ONEROUS THAT IT WOULD BE IMPOSSIBLE FOR THE COMPANY TO PAY BACK THE TAXPAYER AND CONTINUE IN BUSINESS. AND SO I BELIEVE THE TERMS WILL BE CHANGED. IT'S NOT CLEAR YET WHAT THEY WILL DO.
BARTIROMO: I WANT TO ASK YOU ABOUT THE PLAN THAT YOU HAVE PUT FORTH AND REALLY WANT TO LOOK AT SOME OF THE TERMS TO SEE WHICH ARE MOST ERRONEOUS AND REALLY THE TOP TERMS HERE BUT FIRST LET ME ASK YOU. YOU JUST GOT BACK FROM ASIA. WHEN YOU WERE IN CHINA, AIG EMPLOYEES, CUSTOMERS, THEY REACHED OUT TO YOU. WHAT DID YOU HEAR FROM THEM?
GREENBERG: WELL, I THINK EVERYBODY IS JUST BEWILDERED THEY'RE STUNNED AT WHAT HAPPENED TO THE COMPANY. IT WAS THE FIRST FOREIGN INSURANCE COMPANY LICENSED IN CHINA. THE ONLY ONE THAT HAS 100% OWNERSHIP. ON THE OTHER HAND, AIA, WHICH IS THE ENTERED COMPANY IS LOSING BUSINESS. POLICYHOLDERS ARE SWITCHING TO OTHER COMPANIES AND THAT'S TRUE THROUGHOUT ASIA.
EMPLOYEES ARE LEAVING THE COMPANY. IT'S NOT STABLE. YOU'VE TO CREATE A STABLE ENVIRONMENT.
BARTIROMO: HOW DO YOU DO THAT HANK? LET'S GO THROUGH SOME OF THE TERMS THAT YOU THINK SHOULD BE CHANGED. IN YOUR LETTER TO ED LIDDY YOU SAID THE CURRENT FEDERAL GOVERNMENT LOAN TO AIG IS EFFECTIVELY NATIONALIZING THEW COMPANY.
GREENBERG: THAT'S CORRECT. LOOK, AIG BORROWED $85 BILLION FROM THE COMPANY.
BARTIROMO: FROM THE GOVERNMENT
GREENBERG: FROM THE GOVERNMENT. THAT WAS THE FIRST PART OF THE LOAN. THE TERMS ON THAT WERE 8.5 PERCENT WHETHER YOU TAKE THE LOAN DOWN OR NOT ON THE FULL $85 BILLION. AND AS YOU TAKE MONEY DOWN YOU PAY LIBOR ON TOP OF THAT PLUS A TWO PERCENT OVERALL FEE FOR THE TWO YEARS. THIS WAS A TWO YEAR LOAN.
BARTIROMO: SO NOW YOU'RE UP TO WHAT 14%?
GREENBERG: ROUGHLY 14%. 14% ON $85 BILLION OVER TWO YEARS. ROUGHLY, $22 BILLION IN INTEREST. AND THE COMPANY GIVES UP ROUGHLY 80% OF THE OWNERSHIP. IT'S ESSENTIALLY NOT ONLY NATIONALIZATION BUT IT WOULD LEAD TO LIQUIDATION OF THE COMPANY. SO THAT'S NOT A PLAN TO SAVE ANYTHING. THE TAXPAYER DOESN'T GET PAID BACK. THE PENSIONERS LOSE ALL THE BENEFITS THEY'VE HAD. EMPLOYEES LOSE THEIR SAVINGS. RETIRED EMPLOYEES HAVE BEEN CALLING ME AND WRITING ME FROM ALL OVER THE WORLD. SO WHO IS THE WINNER? IT'S A LOSE-LOSE.
BARTIROMO: BIG HIT TO NEW YORK, THE STATE. NOT TO MENTION -
GREENBERG: THE PENSION PLAN THE STATE LOST $200 MILLION. SO WHO IS THE WINNER IN THAT? EVERYBODY IS A LOSER. AND SO YOU WANT TO GET THE TAXPAYER PAID BACK. IT WASN'T A SOLVENCY PROBLEM TO BEGIN WITH. IT WAS A LIQUIDITY PROBLEM. AND SO LIQUIDITY SHOULDN'T LEAD TO A DISSOLUTION OF THE COMPANY.
BARTIROMO: IN ORDER TO PAY THE GOVERNMENT BACK, OBVIOUSLY THE COMPANY WILL HAVE TO SELL ASSETS AND SELL QUICKLY. THE PROBLEM IS, WE'RE AT A MOMENT IN TIME WHERE THE ASSETS ARE DECLINING IN VALUE.
GREENBERG: OF COURSE, THAT'S WHY THE TERMS, WHICH WERE SO -- THEY WERE JUST ONEROUS TO BEGIN WITH. WHY SHOULDN'T THE TERMS BE MORE LIKE THE TERMS UNDER T.A.R.P. FOR BANKS? WHY WOULD YOU HAVE AN INTEREST RATE OF 14.5%? I MEAN, THAT'S JUST NOT PALATABLE TO ANYBODY.
BARTIROMO: WILL AIG BE PERMITTED TO PARTICIPATE IN THE T.A.R.P. PROGRAM?
GREENBERG: WELL, I WOULD HOPE SO. I WOULD HOPE SO. YOU CAN'T RAISE FRESH CAPITAL IN A COMPANY THAT IS OWNED BY THE GOVERNMENT. I MEAN I THINK YOU CAN RAISE FRESH CAPITAL, I THINK YOU CAN HAVE A SHAREHOLDER RIGHTS OFFERING BUT YOU HAVE TO HAVE TERMS THAT SHOW A FUTURE FOR THE COMPANY. AND YOU SHOULDN'T HAVE TO SELL THE MOST VALUABLE ASSETS OF THE COMPANY IN ORDER TO SAVE IT.
BARTIROMO: SO YOU WANT THE PLAN TO BE MODIFIED. LET'S TALK ABOUT YOUR PLAN, PLAN B. WHAT WOULD BE A MORE ACCEPTABLE TERM FROM YOUR STANDPOINT? WHICH WOULD BENEFIT SHAREHOLDERS AND EMPLOYEES?
GREENBERG: TO START WITH, TAKE THE $85 BILLION. INSTEAD OF BORROWING $85 BILLION IN CASH, THE FEDERAL RESERVE, I BELIEVE, COULD HAVE PUT UP A GUARANTEE TO AIG BECAUSE A LOT OF THAT CASH WAS BEING USED AS COLLATERAL ON THE CREDIT DEFAULT SWAP BOOK. AND THE REASON THEY HAD TO COME UP WITH MORE COLLATERAL WAS BECAUSE AIG WAS DOWNGRADED. AND THE MORE THEY WERE DOWNGRADED THE MORE COLLATERAL THEY HAD TO PUT UP.
BARTIROMO: IS THAT WHY THEY'VE GONE THROUGH THE MONEY SO QUICKLY?
GREENBERG: YES. AND SO THAT'S ONE WAY OF HELPING. THAT'D BE A BIG BURDEN OFF - HAVE THERE BEEN ACTUAL LOSSES IN THE CREDIT DEFAULT SWAP BOOK, I DON'T KNOW THAT. BUT UNLIKELY TO BE VERY MUCH IF THERE WAS. AND SO MOST OF IT WAS REALLY, I THINK, FOR COLLATERAL AND YOU COULD HAVE REPLACE THE ACTUAL CASH WITH THE GUARANTEE.SECOND, CONVERT THE 79.9, TAKE THAT OUT. AND GO TO A NONVOTING PREFERRED STOCK THAT THE GOVERNMENT WOULD OWN FOR THE MANY ACTUALLY BORROWED.
BARTIROMO: THAT'S SIMILAR TO WHAT THE GOVERNMENT IS ACTUALLY DOING WITH THE MAJOR BANKS.
GREENBERG: THAT'S EXACTLY RIGHT. SO WHY WOULD YOU HAVE A DIFFERENT PROGRAM FOR AIG. IT'S BASIC INSURANCE BUSINESS WAS FINE. IT MAY NOT BE NOW, BUT IT WAS.
BARTIROMO: WHY DO THEY HAVE A DIFFERENT PLAN THEN, HANK? I DON'T KNOW UNDERSTAND -- WAS IT SUCH AN URGENT SITUATION THAT THEY COULDN'T AFFORD TO DO THE SAME PROGRAM THAT THEY DID WITH THE MAJOR BANKS?
GREENBERG: YOU KNOW, I DON'T KNOW. IT HAPPENED RIGHT AFTER THEY LET LEHMAN GO DOWN.
BARTIROMO: SO THINGS WERE ACCELERATING?
GREENBERG:THINGS WERE ACCELERATING. I THINK THEY WERE ACTING RATHER, KIND OF HELTER-SKELTER. I DON'T KNOW WHAT THEY WERE LOOKING AT AT THE TIME. I THINK THEY SAID THERE WAS CONCERN ABOUT SYSTEMIC RISK. AND I THINK THEY CAME UP WITH A PROGRAM . THAT PROGRAM COULD ONLY LEAD TO THE LIQUIDATION OF AIG. IN FACT I BELIEVE THAT WAS STATED ON "MEET THE PRESS" BY TREASURY.
BARTIROMO: HANK PAULSON WAS ON "MEET THE PRESS."
GREENBERG: AND IT WAS TO LIQUIDATE AIG.
BARTIROMO: THE LIQUIDATING MEANING THAT THEY ARE GOING TO SELL THE PARTS OF THE BUSINESS THAT REALLY ARE NOT CRITICAL TO THE INSURANCE PART OF IT AND CERTAINLY FINANCIAL PRODUCTS IS THE PROBLEM HERE.
GREENBERG: YES. FINANCIAL PRODUCTS WAS THE PROBLEM. THE REST OF THE BUSINESS, YES, IT WOULD SUFFER LIKE EVERYBODY ELSE IS SUFERING RIGHT NOW IN THE GLOBAL ECONOMY. BUT WITH SUCH DIVERSIFICATION IN AIG THAT IT WOULD SURVIVE AND DO WELL. WHEN I LEFT THE COMPANY, IT WAS EARNING $14 BILLION PER YEAR. AND WHAT'S HAPPENED SINCE I DON'T KNOW.
BARTIROMO: HOW COULD THIS POSSIBLY HAVE HAPPENED? SOME PEOPLE JUST HAVE BAFFLED BY THE IDEA THAT AIG WAS TEETERING ON BANKRUPTCY.
GREENBERG: WELL, NO MORE BAFFLED THAN I AM. WE HAD GREAT RISK MANAGEMENT CONTROLS. WHAT HAPPENED, I JUST DON'T KNOW I WASN'T THERE.
BARTIROMO: WHAT ABOUT SOMEBODY WHO MIGHT SAY, HANK GREENBERG KNOWS HOW TO MANAGE RISK AND HE ALSO TOOK ON RISK AND SOME OF THESE CREDIT DEFAULT SWAPS HAD TO HAPPEN UNDER HIS WATCH. WHAT DO YOU SAY?
GREENBERG: I WOULD SAY THAT THEY'RE JUST WRONG. SURE WE HAD SOME MODEST AMOUNT OF CREDIT DEFAULT SWAPS, BUT A MOSDEST AMOUNT,WE WOULD HAVE NEVER HAVE GONE TO THE EXTENT THAT THEY DID. IN ANY EVENT, YOU WOULD HAVE HEDGED IT. THE SAME AS WRITING A LOT OF BUSINESS IN THE INSURANCE SIDE AND NOT REINSURING. I WOULDN'T WRITE OFF ALL OF THE EARTHQUAKE BUSINESS IN CALIFORNIA AND NOT REINSURE IT. IT'S THE SAME THING. WHY WOULD YOU TAKE ON THAT AMOUNT OF EXPOSURE WITHOUT PROPERLY HEDGING?
BARTIROMO: SO WHOSE WATCH WAS THIS UNDER? MARTIN SULLIVAN OR FRANK ZARB OR WHAT?
GREENBERG: MAYBE ALL OF THE ABOVE.
BARTIROMO: SO THEY WERE NOT WATCHING RISK MANAGEMENT
GREENBERG: THERE WAS A SPECIAL BOARD,A SEPARATE BOARD, FOR AIG FINANCIAL PRODUCTS. THERE WAS AN AUDIT COMMITTEE. THEY PUT IN MORE COMMITTEES AFTER I LEFT THE COMPANY THAT I COULD COUNT. THEY INCREASED THEIR FEES. SO THE DIRECTORS AND THE COMMITTEE MEMBERS.
BARTIROMO:THE BOARD GAVE THEMSELVES A RAISE?
GREENBERG: YEAH.
BARTIROMO: LET'S GO THROUGH THE PLAN AGAIN SO THAT PEOPLE UNDERSTAND THE DIFFERENCE, THE PLAN THAT YOU'RE PROPOSING AND WHAT'S ON THE TABLE RIGHT NOW. MOST IMPORTANT IN TERMS OF THE TERMS, YOU'RE SAYING NUMBER ONE THE INTEREST RATE IS ONEROUS AT 14%
GREENBERG: 14% PLUS 80% OF THE COMPANY. I MEAN, TURN THE KEYS OVER.
BARTIROMO:AND YOU'RE SAYING THAT THE GOVERNMENT SHOULD BE TAKING PREFERRED SHARES.
GREENBERG: NONVOTING. AT A RATE OF INTEREST CONSISTENT WITH T.A.R.P., 5 OR 6% ANNUAL DIVIDENDS?
BARTIROMO:ALSO HAVE THE RIGHT TO REDEEM THE PREFERRED SHARES OVER A PERIOD OF TEN YEARS? AND THIS IS SIMILAR TO WHAT WE SAW IN THE BANKS. YOU'VE SPOKEN WITH ED LIDDY THIS. I HAVE THE LETTERS THAT YOU SENT TO ED LIDDY. WHAT HAVE YOU GOTTEN FROM HANK PAULSON AND FROM TREASURY, THE GOVERNMENT IN TERMS OF RESPONDING TO YOUR PROPOSAL?
GREENBERG:I'VE HEARD NOTHING DIRECTLY FROM TREASURY. I'VE HAD SOME WORD FROM THE FED THAT THEY ARE REVIEWING A PLAN TO BRING ABOUT SOME CHANGE. NO DISCUSSION ABOUT SPECIFICS. I UNDERSTAND THAT UNTIL THEY COME TO A CONCLUSION THEY ARE NOT GOING TO TELL ANY ONE INDIVIDUAL. BUT I DO BELIEVE THAT UNLESS IT'S DONE PROPERLY, IT'S NOT GOING TO WORK.
BARTIROMO: HOW LIKELY IS IT THAT IF THEY WERE TO CHANGE THE TERMS, THAT PERHAPS YOU COULD GET THE RATINGS AGENCIES OFF THE BACK OF THE COMPANY? MAYBE THEY WILL PULL IN THE COLLATERAL CALLS. WHAT DO YOU THINK ABOUT THE RESULT OF THIS?
GREENBERG: I THINK THAT'S EXACTLY RIGHT, MARIA. IF THE FED PUT A GUARANTEE BEHIND AIG FINANCIAL PRODUCTS, FOR EXAMPLE, INSTEAD OF CASH, THE RATING AGENCY OUGHT TO FEEL FAR MORE COMFORTABLE. AND THEY MAY NOT DO IT THE NEXT DAY, BUT IT CERTAINLY WOULD TAKE THE PRESSURE OFF. RIGHT NOW TWO, DAYS AGO, THE S&P PUT THE INSURANCE SUBSIDIARIES OF AIG ON CREDIT WATCH FOR A DOWNGRADE. RIGHT NOW , TWO DAYS AGO, THE S&P PUT THE INSURANCE SUBSIDIARIES OF AIG ON CREDIT WATCH FOR A DOWNGRADE. RIGHT NOW THEY'RE A-. IF THEY LOSE THAT A- INTO A LOWER RATING THE INSURANCE SECTOR IS GOING TO BE UNDER TERRIBLE PRESSURE. THEY'RE GOING TO LOSE MORE A LOT MORE BUSINESS THAN THEY CURRENTLY HAVE.AND SO TIME IS THE ENEMY HERE.
BARTIROMO: WHEN THE GOVERNMENT FIRST CAME IN TO TAKE THIS 80% STAKE, A LOT OF PEOPLE WONDERED WHY IT WAS THAT THEY CHOSE TO GET SO INVOLVED IN AIG AND THEN LET LEHMAN GO AND THERE WERE CERTAIN COMPANIES THAT WERE MUCH MORE IMPORTANT AND WERE TOO BIG TO FAIL, TOO CONNECTED TO FAIL. WHY IS THAT? WHY IS AIG SO IMPORTANT IN WHO ARE THE COUNTERPARTIES HANK.
GREENBERG: WELL, VIRTUALLY ALL OF THE MAJOR FIRMS, THERE WAS GOLDMAN SACHS. IT WAS MORGAN STANLEY.IT WAS INSTITUTIONS ALL OVER THE WORLD. IT WAS GLOBAL.
BARTIROMO: SO THE RIPPLE EFFECTS OF ALLOWING AIG TO FAIL WOULD HAVE BEEN --
GREENBERG: I'M NOT SURE IT WOULD HAVE FAILED, NUMBER ONE. THEY HAD TO MEET COLLATERAL REQUIREMENTS. THEY HAD A CHOICE. THEY COULD HAVE GONE INTO CHAPTER 11. GOING CHAPTER 11, THE DIRECTORS DON'T HAVE ANY COVERAGE FOR LIABILITY. AND SO IT'S NOT IN THEIR INTEREST TO HAVE IT GOING INTO CHAPTER 11. IS THAT ANY REASON TO TURN THE KEYS OVER TO THE GOVERNMENT WHICH IS ESSENTIALLY WHAT WAS DONE. AND IF THERE WAS TIME TO THINK ABOUT A SOLUTION THAT WAS PALATABLE, NOT ONLY TO WORRY ABOUT THE COUNTERPARTIES BUT TO SAVE THE COMPANY AND THE TAXPAYER ULTIMATELY TO GET REPAYED AND EMPLOYEES AND PENSION FUNDS, IT WOULD HAVE BEEN CERTAINLY A MORE PALATABLE PROGRAM THAT WOULD HAVE EMERGED RATHER THAN JUST HASTILY THROW AWAY THE KEYS, WHICH IS WHAT THEY DID.
BARTIROMO: YOU ARE CLOSER TO THIS SITUATION COMPANY THAN ANYBODY IS. YOU BUILT THIS COMPANY IT'S IN MORE THAN 150 COUNTRIES. YOU TOOK IT FROM A SMALL INSURANCE COMPANY AND BUILT IT, INTO THE LARGEST INSURANCE COMPANY IN THE WORLD. YOUR LIFE, YOUR EMOTION IS TIED TO THIS. YOUR WEALTH IS TIED TO THIS.
GREENBERG: IT WAS.
BARTIROMO: YOUR WEALTH WAS TIED TO THIS. HOW TOUGH HAS IT BEEN AS FAR AS THE NUMBERS?
GREENBERG: WELL, THE NUMBERS HAVE BEEN TERRIBLE FOR EVERYBODY. WHEN I LEFT THE COMPANY IT HAD AN $870 BILLION MARKET VALUE. IT'S ABOUT $5 BILLION NOW. SOMETHING LIKE THAT. I MEAN IT'S WIPED OUT NEW YORK STATE PENSION FUND, LOST $1.2 BILLION SO FAR. PENIONERS AROUND THE WORLD AND OUR COMPANY, EMPLOYEES' THEIR LIFE SAVINGS HAVE BEEN WIPED OUT.
BARTIROMO: DO YOU FEEL WIPED OUT?
GREENBERG: NO, I'M WORKING. I'VE GOT CV STARR & COMPANY I'LL GET BY.
BARTIROMO: MY QUESTION THERE WAS, WHERE I WAS GOING WITH THAT IS, EVERYBODY HAS THE SAME GOAL HERE, RIGHT? THEY WANT TO SAVE AIG, RIGHT? THE GOVERNMENT CLEARLY WANTED TO BE THERE TO SAVE IT AS WELL. THEY WOULD NOT ALLOW IT TO GO BANKRUPT. IF EVERYBODY HAS THE SAME GOALS, WHY WOULDN'T THE GOVERNMENT PUT DIFFERENT TERMS ON THE TABLE? WHY DO YOU THINK THEY ARE NOT LISTENING TO YOUR PROPOSAL?
GREENBERG: I THINK THEY ARE GOING TO PUT DIFFERENT TERMS ON THE TABLE. THE QUESTION IS, WHAT ARE THOSE TERMS? AND ARE THE TERMS GOING TO BE CHANGED ENOUGH SO THAT THE COMPANY HAS A REALISTIC FUTURE OR -- BECAUSE YOU CAN'T RAISE SEPARATE CAPITAL FROM THIRD PARTIES OR A RIGHTS OFFERING. PEOPLE LOOK THROUGH THE, YOU KNOW, WHAT THE OPPORTUNITIES ARE AND IF THEY SEE THAT THE TERMS ARE NOT GOOD ENOUGH, THEY ARE NOT GOING TOI INVEST IN IT. AND SO ALL YOU DO IS HAVE A SLOW DEATH RATHER THAN A RAPID DEATH.
BARTIROMO: FINAL QUESTION HERE, HANK, AND THAT IS, YOU HAVE TALKED OR SUGGESTED THAT MAYBE WOULD YOU BE INTERESTED IN BUYING SOME OF THE ASSETS. ARE YOU STILL DOING THAT?
ARE YOU PUTTING A GROUP TOGETHER TO TRY AND ACQUIRE THE INSURANCE OPERATIONS OF AIG?
GREENBERG: LOOK, YOU KNOW, MY FIRST GOAL WAS TO TRY AND HELP BRING ABOUT A CHANGE IN THE TERMS THAT EXISTED FROM THE GOVERNMENT. THAT'S THE FIRST GOAL, IS TRYING TO KEEP AIG TOGETHER. IF AIG IS GOING TO BE SPLIT APART, THEN, YES, I WILL WORK WITH SOME GROUPS TO ACQUIRE SOME ASSETS. BUT I WOULD RATHER NOT DO THAT. I WOULD RATHER SEE THE COMPANY STAY INTACT.
BARTIROMO: AND HAVE YOU GOTTEN A RESPONSE IN TERMS OF YOUR INQUIRIES TO ACQUIRE ASSETS?
GREENBERG: WE'VE GOT SOME RESPONSE. IT'S BEEN SO-SO.
BARTIROMO: HANK, THANK YOU SO MUCH FOR
JOINING US.
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