As talks continued to secure financing to help American International Group avoid being forced into bankruptcy, AIG's former chairman and chief executive officer, Maurice Greenberg, today said the Federal Reserve should provide a bridge loan to AIG if the private markets are unwilling to raise the cash the company needs to solve what he called "a liquidity problem, not a solvency problem."

CNBC analysts said the situation was dire, and that if no loan deal could be completed today, it was likely that AIG would be forced into bankruptcy.

Mr. Greenberg made his comments on the "Squawk Box" show on CNBC this morning as bankers, state regulators and federal officials met at the New York Fed offices in order to raise as much as $75 billion to stabilize AIG.

In his comments, Mr. Greenberg said it is in the "national interest that AIG survive."

He added that, "It's not a bailout; it's a cash problem."

He spoke as AIG's stock recovered a bit on the New York Stock Exchange, trading at $3.08 at 10:00 a.m.--down $1.68 from its Monday close, but up from its opening this morning at $1.85.

One suggestion Mr. Greenberg made was for rating agency downgrades to be held in abeyance for 90 days--a move, he suggested, that would give AIG time to do a rights offering, and buy time for it to sell assets.

"It's a national treasure. Letting AIG go down would be a tragic mistake," Mr. Greenberg said.

He said resolving the company's trades with counterparties if the firm filed for bankruptcy "would take years," adding that forcing AIG into bankruptcy would in effect mean "creating a systemic problem."

"There is no business like AIG," he said. "It affects everything we can do in the world. It would be a loss to America."

In the meantime, explaining a move to shore up AIG announced yesterday by New York Gov. David Paterson, state insurance regulators clarified that they would allow AIG to transfer up to $20 billion in liquid assets to the parent company to help with a liquidity crisis--but only if the loan is well-collateralized, and is part of a larger plan designed to have the company remain an ongoing business.

Cautioning that the agency has not yet approved the transfer, a staff official of the New York Insurance Department made clear approval of such transfers would only be part of a package deal that helped the company stay in business.

"Our main job is protecting policyholders--that is what we do," said the insurance department official.

"We would allow AIG to move more saleable assets to the parent company to provide liquidity only if the loan is well collateralized," said the official, who declined to be identified.

Specifically, he explained that a transfer the agency would approve would involve collateralizing the movement of liquid municipal bonds held in the portfolio of a property-casualty company owned by AIG by pledging an AIG-owned life insurance company.

The clarification was issued as officials from the company, the insurance department and private investment firms were working with the Federal Reserve Board to provide up to $75 billion in loans to AIG to help it meet collateral requirements from counterparties to its credit default swaps.

Four agencies cut AIG's ratings last night, exerting more pressure on banks and the Federal Reserve to put together an emergency loan package to help the company meet anticipated demands from counterparties today for additional collateral prompted by the downgrades.

Special Reports /

Greenberg Says Help For AIG Is 'Not A Bailout'

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