This is a rush transcript from "Your World With Neil Cavuto," November 10, 2008. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, more bailouts dollars today heading to AIG. That means more government ownership in AIG. You have heard the free market guy Ron Paul rail against this sort of thing.

Why the CEO of this giant insurance conglomerate is all for it.

Edward Liddy is here.

Mr. Liddy, good to have you.

EDWARD LIDDY, CEO, AMERICAN INTERNATIONAL GROUP: Thank you. Good to be here.

Video: Watch Neil's interview with AIG CEO Edward Liddy

CAVUTO: You came in as a former CEO of Allstate. So, you sort of inherited what some have likened to a financial Titanic that has yet to clear icebergs. A lot of people seem to think it is still doomed.

Is it?

LIDDY: No, I don't think it's doomed at all, Neil.

I think the arrangement, the new arrangement, we have with the Federal Reserve and Treasury is really a very positive one. It reflects them using all of the tools now at their disposal to help resolve the financial crisis that the country and the world are in. And I think it puts AIG in a much, much better position.

CAVUTO: All right, nevertheless, it's — it is all about confidence, right, Mr. Liddy? I mean, you have to instill confidence. You came in and inherited all of this, but, nonetheless, you are the guy who has to tell people, this is worth the money. This is worth the taxpayer bailout. And it is worth considering for your financial needs, your insurance needs.

But are people leery in this environment? Are they holding off on getting an insurance policy with you, an annuity policy with you, or renewing the policies they might have with you?>&
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LIDDY: No, you know, Neil, what we saw when this — when the information about AIG being in distress first hit the wires back in the middle September, we clearly saw some of that.

But that has really been stabilized. I mean, we are — with the — with the backing of the federal government and its various — various agencies, we're in a very strong position. So, our renewal rates continue to be at or maybe slightly below historic levels. We're selling a lot of new business.

CAVUTO: What kind of new business? What kind of new business?

LIDDY: We just reported for the third quarter of this year — oh, all kinds of new business, property casualty business, DNO insurance, life, savings, retirement, domestic, international. We are doing just fine. We had $21 billion in revenue in the third quarter. That was up 7 percent.

CAVUTO: So, new people are taking out new policies with you? That's a pretty big deal. If you're someone who is taking a life insurance policy with you, and they know they are going to die some day, and they are betting that you are going to be there to cover them and their family when that — when that happens, you are saying people are doing just that?

LIDDY: Well, Neil, I would remind you, our insurance subsidiaries, the kinds of companies that sell the products you just mentioned, they are rock-solid. They were well-capitalized. They're strong. We're going to be there for the policyholders.

That's not our issue. Our issues is some of the miscellaneous businesses that we got into, the financial products area, and the credit defaults swaps.

CAVUTO: Right.

LIDDY: So, it's two totally different issues, ought not to be confused.

CAVUTO: All right. But, nevertheless, they sometimes get caught up in the same drama, right? And people who hear any bad press on you are leery to do business with you.

(CROSSTALK)

LIDDY: Now, you — you obviously were looking at putting a number of parts of the business up for sale, maybe completing or at least getting the process rolling in these final couple of months.

Names, entities, units, what would they be?

LIDDY: Well, I am not going to go into the names of the entities.

I will tell you we have a very smart, very disciplined process, has not changed since we announced it in October. We have been waiting to get this particular arrangement announced with the Federal Reserve, because the loan that we have from the Federal Reserve goes from two years to five years.

So, we have a lot more time to execute the various and sundry transactions that we are going to enter into. We have remarkable assets to sell. We will be in fairly good shape to sell those in due course. It is not a fire sale. This — this announcement, the announcement of this transaction, I think, clearly indicates that. We should be able to do this in an orderly way and get full value, used the proceeds to repay the taxpayer.

CAVUTO: All right.

As you might have heard earlier on, sir, we had Ron Paul, the former presidential candidate, who argues, this notion of being too big to fail, when it is applied to a company of AIG's size, is a sign that maybe it is - - it's too big to move forward, and that you should have been allowed to let fail, that — that the threat that it would be ominous for the world if you did was sort of like a false cue.

What do you make of that?

LIDDY: Well, I think, if you look at the failure of Lehman Brothers, and if AIG had failed right after that, I think it would have been just a disastrous blow to the worldwide financial system.

We are a very big company. We do business in 130 countries around the world. We're the largest insurance company in the United States, one of the largest in the world. And, as such, we have financial entanglements with just about every financial institution of size around the globe.

So, I think it would have been very difficult for an already troubled financial system to absorb another major hit. I think what the U.S. Treasury and Federal Reserve did is, they looked at those facts and said, wait a minute. The underlying business of AIG is rock-solid. It can do well, if we can just help it survive the distress that it's in.

CAVUTO: But you see what happened, though? Through no fault of your own, everyone is out with their hands, right, the auto industry, others in the banking industry. And — and I could go on and on, sir, but you get the message here, that, once you bailout one, ostensibly, you start bailing out everybody, and everyone comes to Uncle Sam.

Now a number of states are doing it. So, do you think, with the best of intentions, what the government did, in rescuing AIG, is open the spigot to put everybody on the dime?

LIDDY: You know, I don't think so, Neil.

I think what the government did was look at those institutions that really are central to the economy and central to the financial system. And we are one of them. So, what they have done with the banks to inject capital, so the banks can begin to get the lending machinery working again, I just think that is really smart.

I don't think you can do nothing. I don't think you can have a laissez-faire attitude in this situation. I think the government does have to do something. I think the — the — the tools they have been using, I think, are beginning to help.

CAVUTO: But, you know, were there any conditions attached to this latest money, Mr. Liddy? You touched on them, but, in the case of some other banks, for example, that were rescued, some of them bought back stock. Others bought other banks.

And — and, for the life of me, I don't know if that was in the literature on the original moneys provided. And a lot of taxpayers hear or see that, and say, well, wait a minute. Something is amiss.

LIDDY: Yes, there are not conditions of that nature attached to our loan.

I will tell you, we are paying a fair amount of money to the taxpayer. The taxpayer will do very well on our preferred stock and on the loan that we have outstanding, and some upside on some financial entities that we have outstanding. But...

CAVUTO: Well, if you survive, if you survive, right?

LIDDY: ... we're not going to use this money to go buy something.

CAVUTO: OK. So, you are telling me now...

(CROSSTALK)

CAVUTO: ... I know, you are not going to use it to buy something. I know you personally were leading an effort to try to limit executive compensation, put a freeze on bonuses to 70 of your top executives. You personally led that. So, my hat is off to you.

You also were trying to put a limit on severance benefits. What do you think of those who did none of that?

LIDDY: You know, I think everyone is coming to the same place at the same time. There's just a lot of work to do in this area in general. And I think right-thinking people are arriving in the right place at the right time.

CAVUTO: All right.

Listen, it — Ed Liddy, very good having you. We will see how it all works out. Thank you.

Sorry for the lighting problems. It was not personal.

LIDDY: Thank you, Neil.

CAVUTO: I don't know what happened there.

LIDDY: Yes.

(LAUGHTER)

CAVUTO: Edward Liddy, the man who heads AIG.

LIDDY: Thank you.

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