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CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO INTERVIEWS CV STARR & CO. CHAIRMAN & CEO HANK GREENBERG ON CNBC'S "CLOSING BELL" TODAY

Maurice "Hank" Greenberg
AP
Maurice "Hank" Greenberg

WHEN: Today, Thursday, February 26th 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 (former Chairman & CEO, AIG) Hank Greenberg, on CNBC, airing on "Closing Bell"

All references must be sourced to CNBC.

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MARIA BARTIROMO: HANK NICE TO HAVE YOU BACK ON THE PROGRAM.

HANK GREENBERG: GOOD TO BE WITH YOU.

BARTIROMO: JOE BIDEN MAKES A GOOD POINT. THE MONEY GIVEN TO AIG SEEMS TO HAVE EVAPORATED AND WE'RE TALKING AN ENORMOUS NUMBER. $150 BILLION. I NKNOW I ASK YOU ALL THE TIME, BUT WHERE HAS THIS MONEY GONE?

GREENBERG: SOME HAS GONE TO COUNTERPARTIES IN THEIR CREDIT DEFAULT SWAP BOOK, SOME ON THE SECURITY LENDING PROGRAM THAT THEY HAD. AND I DON'T KNOW HOW MUCH HAS BEEN LOST IN OPERATING INCOME. WE HAVEN'T SEEN ANY NUMBERS YET. AND THEY'VE GOT A COMMERCIAL PAPER PROGRAM. AND THEN THERE WAS A LOAN OF $60 BILLION, DOWN FROM THE 85 ORIGINALLY.

BARTIROMO: I THINK MOST PEOPLE ARE REALLY UNNERVED BY THE IDEA THAT WE SEEM TO NOT UNDERSTAND HOW STEEP THE BLACK HOLE IS. WHAT THE VALUE OF THESE SO-CALLED TOXIC TIER 3 ASSETS ARE. DO YOU HAVE ANY IDEA?

GREENBERG: NOBODY HAS AN IDEA BECAUSE WE WON'T KNOW ABOUT THESE ASSETS FOR YEARS TO COME. MOST OF THE LOSSES ARE PAPER LOSSES. THEY'RE BEING WRITTEN DOWN TO WHAT IS SUPPOSED TO BE A MARKET. BUT THE MARKET MANY TIMES IS VERY THIN. AND YOU KNOW, THERE WAS A WAY OF SAVING AIG. I TALKED ABOUT IT BEFORE ON THIS PROGRAM. AND PUBLICLY. YOU'VE GOT TO REBUILD AIG, NOT BREAK IT UP. HOW ARE YOU GOING TO PAY BACK THE TAXPAYER IF YOU CAN'T SELL ASSETS IN THIS MARKET? AND I'VE BEEN SAYING THAT FOR SOME TIME. THEY FINALLY ARE REALIZING THAT THEY CAN'T SELL THEM AT THE VALUES THAT THEY REALLY SHOULD BE GETTING.

BARTIROMO: WHAT ARE YOU GOING TO DO, HANK? YOU'VE GOT THE ASSETS. YOU'VE GOT TO PAY BACK THE GOVERNMENT. YOU MIGHT NOT BE ABLE TO GET YOUR PRICE FOR YEARS ON ANY OF THESE ASSETS.

GREENBERG: SO WHAT'S THE DIFFERENCE IF IT TAKES A LONGER TIME TO PAY BACK THE GOVERNMENT? IT'S BETTER THAN NOT PAYING BACK THE GOVERNMENT. AND SO REBUILD THE COMPANY AND RAISE PRIVATE CAPITAL, REDUCE THE GOVERNMENT FROM 79.9%, WHICH ESSENTIALLY IS NATIONALIZED, TO SOMETHING WHICH ENCOURAGES PRIVATE INVESTORS TO COME IN. LOOK, I DON'T QUITE UNDERSTAND. ON THE ONE HAND, THOSE IN GOVERNMENT NOW SAY WE DON'T WANT TO NATIONALIZE THE BANKS, FOR EXAMPLE. THEN WHY DID THEY NATIONALIZE AIG? WHAT'S THE DIFFERENCE? HOW DOES THE GOVERNMENT RUN AN INSURANCE COMPANY?

BARTIROMO: WELL, CLEARLY AIG NEEDED A SAFETY NET AND THEY NEEDED TO DO SOMETHING, RIGHT? SO WHAT YOU'RE SAYING IS THEY SHOULD HAVE DONE SIMILAR TERMS TO WHAT THEY DID WITH CITIGROUP.

GREENBERG: YES. WHY WOULDN'T THEY HAVE GIVEN GUARANTEES INSTEAD OF - A LOT OF THE MONEY CAME INTO AIG, WENT OUT THE BACK DOOR TO COUNTERPARTIES. THAT COULD HAVE BEEN DONE WITH GUARANTEES. IT DIDN'T HAVE TO BE CASH.

BARTIROMO: THE COMPANY IS EXPECTING TO REPORT -- I MEAN, THE NUMBERS ARE REALLY STAGGERING. THE COMPANY IS EXPECTED TO POST A FOURTH QUARTER LOSS OF $60 BILLION. BIGGEST IN CORPORATE HISTORY. IT IS IN TALKS FOR FURTHER AID. THIS IS A COMPANY OBVIOUSLY THAT YOU RAN FOR FOUR DECADES, UNTIL 2005. HOW MUCH MORE MONEY DO YOU THINK AIG WILL NEED?

GREENBERG: I DON'T KNOW. I HAVEN'T SEEN THE FINANCIALS. BUT IT'S HARD FOR ME TO BELIEVE THAT THEY COULD HAVE LOST $60 BILLION IN THE QUARTER. UNLESS IT'S A TOTAL WRITE-OFF OF SOMETHING IN THE PARENT COMPANY.I JUST DON'T KNOW.

BARTIROMO: WELL, THE REAL PROBLEM WAS THE FINANCIAL PRODUCTS BUSINESS IN LONDON, CORRECT?

GREENBERG: YES.

BARTIROMO: IS THAT STILL WHERE MUCH OF THE LOSSES ARE, DO YOU BELIEVE?

GREENBERG: PART OF IT MUST BE THERE. PART OF IT'S SECURITY LENDING PROGRAM. BUT WHAT I DON'T UNDERSTAND IS THEY'VE BEEN AT THIS NOW FOR MONTHS AND MONTHS. I MEAN, WHY SHOULD THIS COME AS A SURPRISE? SOMETHING SHOULD HAVE BEEN DONE TO HEAD THAT OFF BY NOW.

BARTIROMO: WHAT DO YOU MAKE OF THE GOVERNMENT'S ACTIONS SO FAR? CLEARLY THE BENEFICIARIES OF THE TARP MONEY ARE GIVEN STRINGS ATTACHED, AND THAT INCLUDES SALARY CAPS, THAT INCLUDES MAKING SURE THE GOVERNMENT IS AWARE AND OKAYS THE USE OF HOW YOU'RE SPENDING YOUR MONEY. SO FAR WHAT IS YOUR ASSESSMENT OF HOW TIM GEITHNER AND COMPANY ARE DOING?

GREENBERG: LOOK, I DON'T THINK THAT YOU CAN HAVE THE GOVERNMENT RUN BUSINESSES. WHETHER IT'S HAVING 40% OR 79.9%. HAVING GOVERNMENT SET THE TERMS FOR EXECUTIVES AND BUSINESSES IS SIMPLY WRONG. I MEAN, YOU GROW UP IN THIS COUNTRY BELIEVING IT'S A FREE MARKET ECONOMY, AND WE HOLD OURSELVES OUT TO THE WORLD AS BEING THAT. YOU CAN START OFF BEING VERY POOR AND REACH GREAT HEIGHTS. THAT PROMISE IS BEING DISPELLED. WE'RE BEING SOMETHING DIFFERENT THAN WHAT WE WERE. AND IT'S VERY TROUBLING TO MANY PEOPLE. NOW, YOU CAN HAVE A GOVERNMENT AGENCY SETTING RULES BY PEOPLE WHO NEVER RAN A BUSINESS BEFORE. IF YOU NEVER RAN A BUSINESS, IT'S PRETTY HARD TO SET THE RULES OF HOW TO RUN THAT BUSINESS.

BARTIROMO: SO WHAT DO YOU THINK IT'S GOING TO TAKE TO GET CONFIDENCE BACK AND TO GET THE STABILIZATION BEGINNING FOR THE BANKS?

GREENBERG: I THINK YOU HAVE TO DEAL WITH THE TOXIC ASSETS --

BARTIROMO: RIGHT. BUT WE DON'T KNOW HOW BIG THE HOLE IS.

GREENBERG: OKAY. BUT TAKE THEM OFF THE BOOKS, PUT THEM IN A GOOD BANK/BAD BANK. AND THE BAD BANK WILL RUN OFF IN TIME. AND MUCH OF THAT WILL RECOVER. IT'S A MATTER OF TIMING. LOOK, THE WORST THING THAT WAS DONE WAS HAVING MARK TO MARKET THE WAY IT WAS DONE. WHEN YOU HAVE A THIN MARKET, IT'S VERY DIFFICULT TO SAY THAT IS THE MARKET. THAT WAS DONE IMPROPERLY. AS FAR AS I KNOW, FASBY WAS WORKING ON A PLAN TO HAVE MARK TO MARKET APPLIED DIFFERENTLY FOR DIFFERENT BUSINESSES, BUT THEY DIDN'T COME OUT WITH IT IN TIME, SO THEY CAME OUT WITH THIS.

IT WAS VERY DESTRUCTIVE.

BARTIROMO: WOULD YOU EVER HAVE BELIEVED THAT AIG SHARES WOULD BE AT 54 CENTS? THAT'S WHERE THEY ARE RIGHT NOW.

GREENBERG: NO. NEVER IN A MILLION YEARS.

BARTIROMO: IT'S UNBELIEVABLE. AND YOU KEEP TRYING TO TRY TO GET CHANGE HERE. AND MEANWHILE, YOU'VE GOT YOUR OWN STUFF GOING ON. IS THERE STILL AN ACTIVE INVESTIGATION WITH THE A.G.'S OFFICE GOING ON?

GREENBERG: NOT THAT I KNOW OF BEING ACTIVE. IT'S BEEN PENDING FOR SOME TIME.

BARTIROMO: WHY NOT JUST SETTLE, HANK?

GREENBERG: WELL, I WON'T DO THAT BECAUSE I DID NOTHING IMPROPER. SO I WILL NEVER SETTLE. I'M NOT GOING TO SETTLE SOMETHING THAT WAS NOT IMPROPER.

BARTIROMO: YOU'VE BEEN TRAVELING A LOT AROUND THE WORLD. TELL ME HOW YOU SEE IT. HOW TOUGH IS IT RIGHT NOW FOR THE ECONOMY?

GREENBERG: I THINK IT'S VERY TOUGH. I THINK IT COULD TAKE A LONG TIME TO RECOVER. AND CONFIDENCE HAS BEEN SHATTERED ON THE PART OF MANY PEOPLE. AND IT'S GOING TO TAKE A LONG TIME TO RECOVER.

BARTIROMO: ARE THERE AREAS OF THE WORLD THAT YOU BELIEVE ARE WEAKER THAN NORTH AMERICA RIGHT NOW? WHERE DO YOU THINK ARE THE WORST SPOTS?

GREENBERG: I THINK IT'S HERE. I THINK THE UK IS TOUGH. AND I THINK WESTERN EUROPE. I THINK CHINA, ON THE OTHER HAND, WILL COME OUT OF THIS PRETTY WELL. THEY'LL WORK THEIR WAY OUT OF IT.

BARTIROMO: BUT IT'S SLOWING DOWN THERE.

GREENBERG: IT'S SLOWING DOWN, BUT IT'S SLOWING DOWN TO WHAT, BETWEEN 6% AND 8%-N THAT RANGE? THINK ABOUT THAT. 6% TO 8%. NOW, THEY NEED ABOUT 8% TO PROVIDE NEW JOBS FOR PEOPLE. BUT THEY'LL COME OUT OF IT.

BARTIROMO: DO YOU WORRY THAT THEY'RE GOING TO START SELLING OUR SECURITIES, TREASURIES?

GREENBERG: I DON'T THINK SO.

BARTIROMO: HANK, GREAT TO HAVE YOU ON THE PROGRAM.

GREENBERG: GREAT TO BE HERE.

BARTIROMO: WE SO APPRECIATE IT.





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