AIG - How We Got to Bailouts and Outrageous Bonuses

This is a rush transcript from "On the Record ," March 16, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Moments ago, AIG's former CEO, Hank Greenberg, talked to FOX's Neil Cavuto.


NEIL CAVUTO, HOST, "YOUR WORLD": So you're suing them. A lot of taxpayers are ticked off that they keep funneling money into the company.

HANK GREENBERG, FORMER AIG CEO: We're all ticked off. I'm ticked off. Of course I'm ticked off.

CAVUTO: Well, yes. You're a billionaire. You're down to, like...


CAVUTO: ... like, a net work of $20,000 now.

GREENBERG: Slow down. This was a great company. It lost money for thousands and thousands of people. It had a market cap of about $150 billion, $160 billion.

CAVUTO: Is it too late? Is it too late to come back?

GREENBERG: No. Not if you do it the way I've suggested.

CAVUTO: All right. So stretch money out over a greater time period, less onerous terms. But a lot of folks in Washington, even for the president, from what he's saying, it could be a good money going after bad.

GREENBERG: Well, could be, but it could be not, too. You know what? This company is -- you can never build another AIG. There's no company in the insurance industry that's in 130 countries. It's penetrated markets that other companies would love to get into. And so breaking it up and selling off pieces here and there, what is that going to do?


VAN SUSTEREN: Joining us live outside AIG headquarters in New York City is Lee Wolosky, attorney for former AIG CEO Hank Greenberg. Nice to see you, Lee.


VAN SUSTEREN: All right, what does -- what does your -- what does Hank Greenberg think about these contracts?

WOLOSKY: Well, when Greenberg left the company, this was a $160 billion market cap company. Stock was trading at $64 per share. The company had over 100,000 employees. Today, the stock is trading close to 64 cents per share. The company is exuding (ph) bonus payments left and right based on purported contractual obligations instead of performance. For many years, AIG-FP was a successful unit of AIG. For two decades before Greenberg left the company, it earned $5 billion in income for AIG.

VAN SUSTEREN: Can you say -- let me stop you a second. Can you say, though, that if Hank Greenberg was still the CEO, we wouldn't be in this mess, or he just get lucky and get out at the right time?

WOLOSKY: There's no question that the multi-sector CDOs, which are the -- which have caused this problem, were written overwhelmingly in the period after Hank Greenberg left the company in 2005. AIG has not denied that.

VAN SUSTEREN: Who's responsible for that?

Watch Greta's interview

WOLOSKY: That was done under Mr. Greenberg's successor, Mr. Sullivan's, watch.

VAN SUSTEREN: And where's he?

WOLOSKY: I don't know. He's not here talking to you tonight.

VAN SUSTEREN: Indeed, he is not. What about these contracts, though, this $165 million bonus contract? You're a lawyer. Can they be abrogated, like they would be if they went -- if AIG had been thrown into bankruptcy instead of the bailout?

WOLOSKY: Well, the president seems to think that that might be possible. Of course, we're not going to know because it hasn't been tested. The proper thing to do, if this company had stern leadership -- which it doesn't -- would be to resist every effort to pay this money out, to leave no stone unturned.

VAN SUSTEREN: Well, you say the stern leadership -- right now, there's a CEO in place that's a government place (ph) CEO, and he says that, We need these contracts, although he's not in favor of them -- they were in effect before he got there -- to retain the best and the brightest!

WOLOSKY: Well, clearly, there's a logical flaw in that argument. But as a lawyer, the point is that you don't know if a court would have upheld these contracts or not because this didn't go to a court. Instead, what happened is that these payments were made -- tried to be made quietly over a weekend. The proper thing to do would be to have resisted making these payments or to require a contractual situation to the beneficiaries to receive a haircut, to give them a haircut of some sort.

VAN SUSTEREN: Did they try to -- when you say it was quietly paid over the weekend, were they trying to sneak this one in on us?

WOLOSKY: I think they might have been, but again, it didn't work and...

VAN SUSTEREN: It certainly did not!

WOLOSKY: And the proper...

VAN SUSTEREN: We're out here in front of AIG headquarters! We're onto them!

WOLOSKY: But if it had been tried in a court -- you know, we don't know if a court under these extraordinary circumstances for AIG would have obligated the company to use the American taxpayers' money to pay this money out. We do know that it wouldn't have happened right now.

VAN SUSTEREN: But Lee, wait a second. I mean, if this had been a bankruptcy court, if we'd never bailed them out and AIG were in bankruptcy court, I can't imagine that anyone would let them get 100 percent on the dollar of any contract. Nobody gets $100 in bankruptcy.

WOLOSKY: Absolutely not. And that's why I say under these circumstances, where the federal government intervenes to prevent a bankruptcy filing, it's just not necessarily as clear as it was portrayed in Liddy's letter that a court would have, in fact, ordered these payments to have been made under these circumstances.

VAN SUSTEREN: Well, he's trying to sugarcoat it.


VAN SUSTEREN: Maybe? Not even maybe! Maybe yes! Maybe -- he certainly was. But why -- you know, I actually fault (INAUDIBLE) Congress. I mean, when Congress handed over this dough, they should have looked into it. You know, they do these things. They rush this stuff through, and they never take a look at it. I mean, they should have looked to see what the bonus payments were going to be.

WOLOSKY: Absolutely. You know, there are executive compensation limits and clawback provisions in the TARP bill that was passed, but we just don't see them being applied in this situation. And I think the president was right today to call for these payments to cease. You know, as you know, AIG is trying to get even more executive compensation, bonus compensation, from our client, Star (ph) International. It's really a situation, which as the president said and Larry Summers said, is outrageous.

VAN SUSTEREN: Well, this wasn't -- this wasn't even done under President Obama's watch. This was done under Congress. And Congress was just plain stupid. They never -- or sloppy, one or the other. That's my term, not yours. But Lee, thank you very much.

WOLOSKY: Thank you.

VAN SUSTEREN: Thank you.

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