The government will eventually have to pay out $1 trillion to rescue the U.S. economy from the economic slump, says Hank Greenberg, CEO and chairman of C.V. Starr.
"This is deeper than most people want to believe. It's global. It goes into all forms of debt," the former chairman of bailed out insurance giant American International Group told CNBC.
"It's not just the United States, this is really worldwide. We have to deal with the housing issue once and for all."
Greenberg was a supporter of Republican presidential hopeful John McCain, but he gives President-elect Barack Obama high marks for the steps he's taken so far to address the crisis.
"I think that the choice of people is excellent. They're experienced, I think they'll do a good job. Obama's speech was very encouraging. I think he's very practical. We are in a crisis. You have to put ideology aside and you really have to deal with the crisis. I think he is."
"We're doing things that we've never done before, but the beauty of this time compared to the prior depression in 1932 is people are acting and the world is acting together. It's not as if we're acting in isolation," said Greenberg.
Greenberg cautioned the incoming administration to avoid making the same mistakes with Citigroup that he said were made with the government's bailout of AIG. Greenberg said the government initially applied an onerous 14.5 percent interest rate on the bailout. That was eventually reduced to 10 percent.
"The role of government is to try and keep a company alive, not burden it with huge interest rates, but to do a plan that recovers the cost of money to the government plus a modest override," said Greenberg.
According to Bob Eisenbeis, chief monetary economist at Cumberland Advisors and an economist for the Atlanta Fed for 10 years until January, taxpayer backlash is already evident against Congress for approving the Troubled Asset Relief Program (TARP) and for the way the money is being spent.
"Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There’s a lot of supposedly smart people who look to be totally incompetent and it’s all going to fall on the taxpayer,” Eisenbeis told Bloomberg.
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