Greenberg wants U.S. stake in AIG below 20 percent

NEW YORK (Reuters) - Former American International Group Inc's chief Maurice "Hank" Greenberg has called for slashing the U.S. government's stake in the insurer to less than 20 percent as part of a larger plan to restructure the recipient of $180 billion of taxpayer funds, a source with direct knowledge of the situation said on Monday.

Greenberg, who is the largest private shareholder of AIG shares, has been discussing the plan with members of Congress as well as investors since the fall, with the idea of creating a structure for AIG that would yield a full recovery for U.S. taxpayers, the source said.

Greenberg has put together the plan as an alternative to the terms of the government's $180 billion support package for the insurer after it nearly collapsed in September 2008. The government now owns nearly 80 percent of the company, once the world's largest insurer by market value.

Greenberg's plan has not found traction with the government so far, the source said, declining to be named because the talks are not public. Greenberg and AIG Chief Executive Robert Benmosche have been in regular dialogue, the source said.

Other elements of the plan include extending the term of the government's debt facility by more than 10 years and halving the rate on the government preferred stock to 5 percent, the source said.

The idea behind such a structure is to give AIG sufficient time to service its debt and operate its way through the debt maturities, the source said.

The plan also calls for recapturing the money that AIG paid to certain banking institutions and investing it back into the insurer, the source said.

AIG funneled billions of dollars of taxpayer funds to various U.S. and European counterparties after its bailout, including to Goldman Sachs Group Inc, Societe Generale and Deutsche Bank.

Greenberg's plan also calls for the company getting a piece of any gains from the so-called Maiden Lane vehicle that the U.S. Federal Reserve created to rid the insurer of its problem assets, the source said.

Greenberg, who built AIG into the world's largest insurer over nearly four decades, has no designs on running the insurer or being on its board, the source said.

The insurer could attract new capital from sources such as Asian sovereign wealth funds and large U.S. public pension funds if the government were to cut its stake, the source said.

AIG declined to comment, while Greenberg could not be reached immediately for comment.

AIG's shares closed up 29 cents, or 1 percent, at $29.63 on the New York Stock Exchange.

(Additional reporting by Lilla Zuill; Editing by Phil Berlowitz, Leslie Gevirtz)