NEW YORK (Reuters) - Former American International Group Inc AIG.N Chief Executive Maurice "Hank" Greenberg said on Tuesday the U.S. government support for the giant insurer will have to continue until the hobbled company is back on its feet.

CV Star, Inc. Chairman and CEO and former AIG Chairman and CEO Maurice Greenberg speaks at a luncheon at the New York Law School in New York April 24, 2006. REUTERS/Keith Bedford

A day after AIG posted what Greenberg called a “mind boggling” $24.5 billion quarterly loss and snagged a new lifeline from the government, the former CEO said the government’s $150 billion investment means it has too much at stake, and will have to keep the lifeline open.

The government will likely have to spend much more to fix the overall economy, said Greenberg, who called the $700 billion financial rescue legislation “woefully inadequate.”

AIG, a company that Greenberg ran for 38 years, will “be a long time in working out” its financial woes, he said at a conference held by Reactions, an industry publication.

He said fixing the company at all was going to be “pretty damn tough” because it requires the company to repay a $60 billion federal loan with the proceeds of asset sales.

Tough credit markets have thinned buyers, and the insurer has yet to ink any sales.

On Monday, AIG CEO Edward Liddy said he felt the company was in a better position now the government has stepped in to assume mortgage liabilities that had left the insurer deeply in the red over the past four quarters, but did not rule out the need for more federal cash.

“Never say never,” Liddy told Reuters, saying it was possible AIG’s $1 trillion investment portfolio could sustain more losses if financial markets remained volatile.

The company recorded $18.3 billion in losses on investments in the latest quarter.

Greenberg controlled about 11 percent of AIG’s outstanding shares before the government stepped in September, and has said that accounted for the bulk of his personal wealth. Under the federal deal, the government gets a 79.9 percent stake, largely diluting shareholders before the deal.

EASIER TERMS

AIG was saved from bankruptcy by an $85 billion government loan on September 16, but it proved inadequate, and with interest and fees of about 14 percent, was too costly to be a permanent fix.

The U.S. Treasury and Federal Reserve on Monday agreed to invest a total of $150 billion -- $40 billion for preferred shares paying a 10 percent dividend, $60 billion under a five-year credit facility that carries a lower interest rate, and another $50 billion to buy toxic mortgage assets underlying AIG credit default swaps, allowing the insurer to eventually tear up those contracts.

AIG shares, which gained on Monday after the new federal rescue plan was announced, were down nearly 10 percent to $2.06 in early afternoon trading Tuesday on the New York Stock Exchange.

AIG ran into a severe cash crunch in September because of mounting collateral demands from counterparties of its credit default swaps and ratings downgrades.

Greenberg said his wish had been for a 10-year term on the credit facility, and a 5 percent dividend on the preferred shares for at least five years.