WHEN: Today, Wednesday, March 23rd at 8AM ET
WHERE: CNBC's "Squawk Box"
Following is the unofficial transcript of a CNBC interview with AIG CEO Robert Benmosche on CNBC's "Squawk Box." All references must be sourced to CNBC.
STEVE LIESMAN: JOINING US ON THE SQUAWK NEWSLINE AIG CEO ROBERT BENMOSCHE. GOOD MORNING MR. BENMOSCHE.
BENMOSCHE: GOOD MORNING STEVE HOW ARE YOU?
LIESMAN: I'M WELL THANK YOU. CAN YOU TELL ME HAS THE FED RESPONDED TO YOUR OFFER YET?
BENMOSCHE: NO THEY HAVE NOT RESPONDED AT THIS TIME YET.
LIESMAN: IS THERE ANY SENSE AT ALL THAT THERE WILL BE AN AUCTION FOR THESE ASSETS?
BENMOSCHE: WELL, I THINK THERE IS AN AUCTION GOING ON RIGHT NOW SO PART OF THE EFFORT WE HAVE IS THAT TIME IS OF THE ESSENCE, WE WANT TO BE ABLE TO GET THIS BEHIND US AND DECIDE WHAT THE COMPANY WILL BE LOOKING LIKE ON A GO-FORWARD BASIS. AND WE HAVE TO BEGIN TO WORK WITH THE U.S. TREASURY AS YOU KNOW, TO SELL OFF 92 PERCENT OF THE COMPANY. THE AMERICAN TAX PAYER OWNS 92 PERCENT OF AIG. AND AS SUCH, THIS IS AN IMPORTANT TRANSACTION TO MAKE SURE THAT THAT VALUE THAT SHOULD ACRUE TO OUR TAX PAYERS AND TO THE GOVERNMENT ITS GOT THE BEST LOOK FORWARD. AND THAT'S WHY THIS IS SOMETHING WE NEED TO PUSH BY BEING PUBLIC NOW, WE FEEL OTHERS CAN LOOK AT THIS PORTFOLIO -- THIS PORTFOLIO IS AVAILABLE ONLINE. PEOPLE CAN LOOK AT IT. AND DECIDE WHETHER THEY CAN COME UP WITH A BETTER PRICE. IF THERE WAS ANYTHING I WISH THEY'D END A LITTLE LOWER, TO ENCOURAGE PEOPLE TO MAYBE BID. BUT THIS IS A BID WE FEEL IS FAIR AND WE FEEL WE NEED THE DECISION PRETTY SOON HERE AS WE GO FORWARD TO HELP THE TRESURY SELL OFF THIS MASSIVE AMOUNT OF STOCK.
LIESMAN: TELL US WHAT SPECIFICALLY WHY THIS WOULD BE GOOD FOR U.S. TAX PAYERS FOR IT TO BE SOLD TO AIG?
BENMOSCHE: WELL FIRST OF ALL, WE CONTEMPLATED THE RECAPITALIZATION WITH THIS TRANSACTION BEING PART OF THAT. AND SO WHEN WE LAID OUT OUR PLAN IN SEPTEMBER, AND WHEN WE CLOSED IN JANUARY, WE WERE UNDER THE IMPRESSION WE WOULD ACTUALLY BE ABLE TO DO THIS. AND THIS IS BUYING BACK ASSETS THAT AIG HAS ALREADY TAKEN OVER A 20 BILLION DOLLAR LOSS ON. AND SO THESE ASSETS MAY HAVE BEEN TRIPLE A AT ONE POINT IN TIME, THEY ARE NOT TODAY, BUT WHEN YOU LOOK AT 53 CENTS ON THE DOLLAR, THEY REPRESENT SOME VALUE AND WE HAVE A VERY STRONG KNOWLEDGE OF WHAT IS THERE. AND SO EXPECTING THIS TRANSACTION, WE HAVE ACTUALLY BUILT UP A VERY LARGE CASH POSITION -- A LITTLE OVER 20 BILLION DOLLARS IN CASH -- IN SHORT TERM INVESTMENTS RIGHT NOW, AND SO WE ARE UNDER PERFORMING. WE HAVE LIABILITIES, WE HAVE CLIENT ACCOUNTS THAT WE ARE CREDITING INTEREST TO, BUT WE ARE NOT EARNING ENOUGH INTEREST RIGHT NOW IN ANTICIPATION OF...BEING DONE. AND QUITE FRANKLY, WE ASSUMED IT WOULD BE DONE IN JANUARY SO WE ARE NOW WAY BEHIND FOR THE LAST TWO MONTHS.
LIESMAN: BUT WHY WOULDN'T TAX PAYERS BE BETTER SERVED IF BY AN AUCTION PROCESS THAT WOULD ESSENTIALLY MAXIMIZE THE VALUES OF THESE ASSETS?
BENMOSCHE: WELL I THINK THAT THIS IS AN AUCTION EVERYONE SEES WHAT IT IS. YOU'VE GOT PEOPLE SCRAMBLING OUT THERE. WE'VE ALREADY GOTTEN RUMORS THAT PEOPLE TRYING TO FIGURE OUT WHETHER THEY WANT TO COME UP WITH A CASH OFFER. THE ISSUE OF BUYING THESE SECURITIES THOUGH, YOU HAVE TO HAVE THE LIABILITIES AS AN INSTITUTION. AND WE HAVE THE LIABILITIES AND WE NEED TO MAX THOSE WITH THESE ASSETS BECAUSE THESE ARE DURATIONS. AIG GOT IN TROUBLE BECAUSE WE HAD SHORT TERM MONEY BACKING THESE ASSETS. THAT WAS A MISTAKE. WE NOW HAVE LONG TERM INSURANCE LIABILITIES, THESE ARE ASSETS THAT FIT THAT PATTERN OF DURATION. AND THEREFORE, THIS MAKES SENSE OVER THE NEXT 4-5 YEARS TO HAVE THESE ASSETS IN HOUSE.
BARRY STERNLICHT, GUEST HOST: WHAT IS THE YIELD IN DURATION ON THE PORTFOLIO APPROXIMATELY?
BENMOSCHE: IT IS HARD TO GIVE YOU AN EXACT DURATION. I THINK THE YIELD WILL ENHANCE WHAT WE HAVE MAYBE 4 TO 5 PERCENT... THE EXACT AMOUNT OF THE RATE MIGHT GO TO SAY FROM FOUR AND A HALF TO MAYBE EIGHT AND A HALF TO NINE.
STERNLICHT: THEY ARE MORTGAGES THAT CAN BE PRE-PAID BUT NO ONE EXPECTS RATES TO GO DOWN MUCH. I MEAN, SO THE DURATION WOULD EXPAND IF RATE WENT UP I SUPPOSE. SO, THE RMBS MARKET HAS BEEN PRETTY ATTRACTIVE THIS YEAR. IT IS AN AREA WE'VE DONE QUITE WELL IN AND WE ARE FUNDING, BUT THERE ARE A LOT OF PEOPLE THAT ARE HEADING FOR THE HILLS IN THESE MARKETS TODAY. I'M SURE YOU GUYS UNDERSTAND EVERY OUNCE OF THIS PORTFOLIO. EVERY CORNER NOOK AND CRANNY. BUT IT IS VERY TECHNICAL AND IT IS A VERY INTERESTING BUSINESS.
BENMOSCHE: I THINK WHAT'S IMPORTANT IS THAT YOU HAVE TO UNDERSTAND YOUR LIABILITIES AND START THERE. UNDERSTAND THE CHARACTERISTICS OF THOSE LIABILITIES, WHICH WE HAVE ON THE INSURANCE SIDE. AND KNOWING HOW THESE ASSETS SHOULD PERFORM, AND WE THINK THEY WILL PERFORM TO THE LIABILITIES CAUSE WE SEE A SLIGHTLY RISING INTEREST RATE ENVIRONMENT OVER THIS FOUR TO FIVE YEAR TIME HORIZON AND SO WE THINK IT IS A GOOD MATCH AND WE DO HAVE A GOOD UNDERSTANDING OF WHAT THE MORTGAGES LOOK LIKE IN THE PORTFOLIO.
LIESMAN: IS THERE A DIFFERENCE WHETHER OR NOT THE ASSETS ARE OVER AT THE FED EARNING INTEREST INCOME VERSUS IF THEY ARE OVER AT AIG EARNING THAT SAME INTEREST INCOME FOR THE U.S. TAXPAYER?
BENMOSCHE: YEAH. BECAUSE WE ARE GOING TO HOPEFULLY SELL THE SHARES THAT ARE OWNED BY THE TREASURY, HOPEFULLY THIS YEAR, SO THE TAXPAYERS ARE PAID BACK. AND POSSIBLY INTO 2012. SO THEREFORE, TO THE EXTENT THESE ASSETS SIT ON THE BOOKS TO THE FEDERAL RESERVE, IF THEY WERE IN THE EARNINGS PROJECTION OF AIG, THEN THAT WOULD SHOW UP IN THE VALUE OF THE STOCK. BY IT NOT, IT WOULD -- WE RECEIVE ONE-SIXTH OF THE EARNINGS OVER THE NEXT THREE TO FOUR YEARS WHICH WOULD BE FINE, SOME OF THE MONEY WOULD COME BACK TO AIG. BUT IN EFFECT, THE U.S. TREASURY STOCK POSITION WOULDN'T GET THE BENEFIT OF THE VALUE OF WHAT IT IS WE WOULD BE BUYING BECAUSE WE ARE SITTING HERE UNDER PERFORMING ON THE EARNINGS RELATED TO THE CASH THAT WE KEPT IN LIEU OF WAITING FOR THESE SECURITIES TO ARRIVE. SO, THE EARNINGS PROJECTIONS GOING FORWARD WILL BE LIGHTER, WHICH WILL PUT A LITTLE PRESSURE ON THE STOCK PRICE AND THEREFORE, THAT WILL EFFECT THE ABILITY TO -- WE'RE CONFIDENT THAT WE ARE GOING TO BE ABLE TO GET THE TAXPAYER BACK...
STERNLICHT: IT IS ALMOST LIKE AN INTERNAL TRANSFER...
LIESMAN: BUT IT'S MORE THAN THAT. WOULDN'T THE -- MARKET WOULD PUT A MULTIPLE ON THOSE EARNINGS WHEREAS THERE IS NO MULTIPLE OVER AT THE FED...
STERNLICHT: THAT'S HIS POINT. TO 100 PERCENT IN THE FED AND 92 PERCENT OWNING -- SHARE OWNERSHIP. IT'S NOT -- IT'S ALMOST A BALANCE SHEET TRANSFER. IT'S LIKE AN INTERCOMPANY ACCOUNT.
LIESMAN: MR. BENMOSCHE, THERE IS A LOT OF CONTROVERSY AROUND AIG AND THE BAILOUT AND THERE ALWAYS HAS BEEN. ALL IN, YOUR ESTIMATION NOW. WHAT IS THE COST OF THE AIG BAILOUT TO THE U.S. TAXPAYER?
BENMOSCHE: THE COST IS A -- I'LL BE CUTE AND THEN I'LL ANSWER DIFFERENTLY -- IT WILL BE A NEGATIVE PROBABLY 10 BILLION IF WE GET THIS THING WORKED OUT. AND 12 BILLION WHICH MEANS THEY WILL ACTUALLY MAKE A PROFIT. SO THEY WILL GET BACK ALL OF THEIR MONEY, THEY WILL GET BACK ALL OF THEIR INTEREST, AND THEY WILL GET ALL OF THE DIVIDENDS THEY ARE ENTITLED TO. IN ADDITION TO THAT, THEY WOULD GET AT LEAST A 10 TO POSSIBLY EVEN 15 BILLION DOLLAR PROFIT.
LIESMAN: HANG ON. YOU'RE SAYING THAT AFTER ALL THE INK THAT WAS SPILLED AND AFTER ALL THE HOT AIR, THAT ALL IN THE TREASURY PART OF THIS -- THE MAIDEN LANE TWO TO MAIDEN LANE THREE -- EVERY SINGLE ASPECT, YOU ARE NOT LEAVING ANYTHING OUT HERE. THAT IS GOING TO BE A PROFIT FOR THE U.S. TAXPAYER?
BENMOSCHE: I THINK ALL IN, THE GOVERNMENT SHOULD DO AT LEAST 10 POSSIBLY 15 BILLION DOLLAR PROFIT. ALL OF THEIR MONEY BACK AND WHAT IS VERY INTERESTING IS THAT AIG TODAY SAID WE WANTED TO BE THE MOST VALUABLE INSURANCE COMPANY IN THE WORLD. AS MEASURED BY MARKET CAP, WE'VE GOT SEVERAL OTHER MEASURES WE HAVE TO IMPROVE, WE ARE STILL THE LARGEST INSURANCE COMPANY IN THE WORLD BY MARKET CAP. AND SO, THIS IS AN INCREDIBLE COMPANY AND WE ARE PAYING BACK EVERYTHING AND WE ARE STILL GOING TO HAVE A MAJOR EMPLOYER IN THE UNITED STATES GOING FORWARD.
LIESMAN: AND TELL US ABOUT THE PLANS NOW TO UNLOAD THESE TREASURY SHARES. WHEN DO YOU EXPECT THAT TO HAPPEN?
BENMOSCHE: WE ARE WORKING TO GET THE COMPANY RIGHT AND GET OUR PERFORMANCE RIGHT AND I THINK THAT ONCE THE U.S.TREASURY DECIDES ITS TIME THAT THEY WOULD LIKE TO BEGIN TO DO THAT, THAT WOULD BE UP TO THEM TO LET US KNOW WHEN WE CAN SUPPORT THEM AND THEIR SALE.
LIESMAN: SO DOES THAT MEAN THAT THE SPRING AS WE THOUGHT OR IS THERE SOME DELAY NOW?
BENMOSCHE: I THINK -- LOOK WE KNOW THAT IT WILL BE TOMORROW AND NOT YESTERDAY AND I THINK PART OF THIS IS RESOLVING MAIDEN LANE TWO AND THE INVESTMENTS AROUND AND IF WE DON'T DO MAIDEN LANE TWO WE HAVE TO THEN PUT THIS MONEY TO WORK. YOU'VE GOT 21 BILLION THAT'S GOT TO GO TO WORK AND THEN WE HAVE TO SEE WHAT THE OUTCOME WILL BE. SO ALL OF THIS PUTS A PRESSURE ON THE DATE.
LIESMAN: MR. BENMOSCHE THANK YOU FOR JOINING US THIS MORNING.
BENMOSCHE: THANK YOU.
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