This is a rush transcript from "Your World With Neil Cavuto," November 17, 2009. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST: All right. Well, Hank is back, and he ain't happy, and for good reason.
Hank has been warning here and everywhere that the government is rushing in to save AIG, but it's actually going to be making things a lot worse for AIG, now a new government report basically admitting Hank was right all along.
Here with us exclusive reaction, Hank Greenberg, the man who created the insurance giant, and winces a little bit, I'm sure, when he sees what has been happening since. What do you make of this?
HANK GREENBERG, FORMER CEO, AMERICA INTERNATIONAL GROUP: How have you been, Neil?
CAVUTO: I'm fine.
The government essentially saying, you know, we are not doing this right.
GREENBERG: Well, I think the report speaks for itself, doesn't it, if you've read it. I wrote — I read it last night.
CAVUTO: And I bet that you understood it.
GREENBERG: I understood it, yes. Of course I understood it.
CAVUTO: The gist of it is, we threw a lot of money at this puppy, and it is still a hurting puppy.
GREENBERG: Yes. Well, the original terms of $85 billion at 14.5 percent interest, plus a 2 percent fee, and 79.9 percent of the company, that was a little expensive, to say the least. And, obviously...
CAVUTO: Those are mob-like terms. Why did the company agree to it?
GREENBERG: Well, look, I don't think they should have. I think they would have been better off in Chapter 11. Everybody would have been better off in Chapter 11.
CAVUTO: The argument was at the time — and you and I chatted about this during the whole financial crisis — was that they were among those too big to fail, and if they went into bankruptcy, it would have been a domino effect.
GREENBERG: Well, you know, that's — you can't disprove that. You can't prove it either.
CAVUTO: Right. Right.
GREENBERG: And — but the fact of the matter is, of the — the report that I read last night that just came out, of the $85 billion, roughly $51 billion to $60 billion went out — went funneled through AIG to counterparties.
CAVUTO: Like Goldman, right?
GREENBERG: Goldman, Societe Generale, Deutsche Bank, Merrill, a whole load of them.
CAVUTO: So, it got them off the hook?
GREENBERG: What it did...
CAVUTO: But, presumably, the ones that had to really benefit in this case, or the ones for whom it was, you would think, intended weren't the real beneficiaries.
GREENBERG: Well, the — the thing that is hard to understand is that many of the CDOs that these institutions insured...
CAVUTO: These collateralized debt obligations.
GREENBERG: Yes, that — that they insured with credit default swaps with AIG, many of these, many of these instruments were selling way below par, par being 100 cents on the dollar.
GREENBERG: And they were selling at 40, 50, 60 cents on the dollar. And they were paid par. And...
CAVUTO: Which didn't cut it.
GREENBERG: Well, you know...
CAVUTO: But you know what? Hank, I was thinking, if they went bankrupt, right — you had a large stake in the company.
CAVUTO: You were a billionaire many times over at that initial stage.
CAVUTO: You would have been wiped out entirely. At least now the understanding is that guys like Hank can make a go of it if this — they turn this puppy around. And it wouldn't have been possible in bankruptcy.
GREENBERG: No. I think that if AIG had Chapter 11 then — remember, the insurance businesses were all very healthy. OK? And there were no insurance company like AIG. And so I think they would have been — there would have been considerable salvage.
Remember, AIG did not have a solvency problem. It had a liquidity problem.
CAVUTO: Well, it also was victim of a crisis mentality.
CAVUTO: I should disclose here I have an AIG life insurance policy.