NEW YORK—American International Group Inc.'s bailout agreement with the federal government should be changed if the company is to be rebuilt in order to survive, former AIG Chairman and Chief Executive Officer Maurice R. Greenberg said in a televised interview.
"They really have lost their way," Mr. Greenberg, who is now chairman and CEO of C.V. Starr & Co., said during an interview on CNBC's Asia Squawk Box Tuesday. He added that "it's hard to understand" how AIG—which he called the "most successful insurance company in history"—could have fallen so far so quickly.
He said AIG approached the federal government for aid at the last moment. "It was a liquidity problem and not a solvency problem at the time," he said. He said the government's original bailout terms, which have since been revised, were "draconian."
Mr. Greenberg said AIG must be rebuilt and the nature of its arrangement with the federal government—in which the government took a nearly 80% stake in the company—restructured. "You can't raise private capital in a nationalized company, obviously," he said.
"There has to be another change if you're going to save AIG" and pay back the taxpayers, he said. "You can't sell many assets in this market today. You can't sell parts of AIG around the world, because companies don't have any money and you'll never get fair value for what you're trying to sell. That is not the solution."
Instead, Mr. Greenberg said the government should reduce its ownership of AIG to 15% or less. The loan should be extended so "that you're not trying to pay it off in a quick period of time, because you can't."
Mr. Greenberg also said he hasn't made up his mind about whether he would bid for any AIG assets that come on the market. "I don't know yet—I haven't decided," he said.
He also said it would be a mistake for AIG to sell its Chinese AIA unit.
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