AIG CEO Seeking Return Of Some Bonuses
The head of financially strapped AIG told Congress he's heard the rage over executive bonuses and has called on employees to voluntarily return at least half of the money.
Testifying under oath at a congressional hearing as intense as any in recent memory, Edward Liddy said that some workers there already have stepped forward to give money back.
Liddy, who is chairman and chief executive officer of AIG, told a House subcommittee that the bonuses could be defended legally as a legal obligation of the company. But he also said that given the national uproar, he asked those who got "retention payments" over $100,000 to return at least half of it.
That wasn't enough for lawmakers, reports CBS News correspondent Nancy Cordes. Many remain furious that executives would get any bonuses after their unit brought the insurance giant to its knees, requiring a $180 billion public rescue.
"I am now asking you to send us the names of those who have received bonuses who have not given them back," demanded Rep. Barney Frank, D-Mass.
Liddy told Frank he could only do that if the list of recipients would remain confidential.
Frank's reply: "I won't give you that assurance, sir. And so if that's the condition it would be my intention to ask this committee to subpoena them"
New York attorney general Andrew Cuomo beat him to the punch with a subpoena of his own.
But Liddy said making the names public in this environment would put the recipients' lives at risk, Cordes reports, adding that some are already getting death threats. He read one before the House panel: "All the executives and their families should be executed with piano wire around their necks."
Liddy acknowledged that the company's multimillion-dollar bonuses were "distasteful."
"I share that anger," he said, adding that he knows "the patience of the American taxpayers is wearing thin."
The retention payments - ranging from $1,000 to nearly $6.5 million - were not his idea. Liddy himself is not getting a bonus and is only drawing $1 a year in salary. The deals were cut early last year, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company.
Lawmakers from both parties expressed fury over the company's behavior. For the American public, AIG now stands for "arrogance, incompetence and greed," said Rep. Paul Hodes, D-N.H.
Liddy told lawmakers that the company grew into an internal hedge fund that became overexposed to market risks. AIG, which announced it's putting its New York City headquarters up for sale, is the largest recipient of federal government emergency assistance.
"No one knows better than I that AIG has been the recipient of generous amounts of governmental financial aid. We have been the beneficiary of the American people's forbearance and patience," Liddy said. But he also said that "we have to continue managing our business as a business - taking account of the cold realities of competition for customers, for revenues and for employees."
He also said that the some of the roughly $165 million in bonuses paid out over the weekend is necessary to keep afloat the financial services division - the part of the company that has caused AIG much of its financial distress. Otherwise, Liddy said, the company's ability to repay the American people would be damaged.
"I'm trying desperately to prevent an uncontrolled collapse of that business" in order to pay taxpayers back, he said.
Liddy is a former Allstate CEO who came out of retirement at the government's request six months ago to run AIG for a dollar a year.
He struggled to explain why his executives' contractual bonuses were sacrosanct when workers in so many other industries - aviation, automotive, trucking - have seen their contracts broken.
But Liddy surprised lawmakers when he pointed out the Federal Reserve has known about the pending bonus payments for months.
"There is no attempt to do anything under the stealth of darkness or undercover," he said. "We wanted to do what was right in these contracts."
On Wednesday, President Barack Obama waded further into the matter, saying that while no one in his administration created AIG mess, the "buck stops with me" to fix it.
Standing on the White House lawn as he prepared to go to California, Mr. Obama again called AIG's executive bonuses "outrageous." But he said the problem goes deeper than that.
"Just as outrageous is the culture that these bonuses are a symptom of, that has existed for far too long: excess greed, excess compensation, excess risk-taking," he said.
"As we work toward getting ourselves out of the recession, I hope that Wall Street and the marketplace doesn't think that we can return to business as usual," he said.
Mr. Obama said he wants legislation providing greater control over financial institutions and indicated a new "resolution authority" for AIG-type giants is on a fast track to creation.
The president also gave Treasury Secretary Timothy Geithner a vote of confidence, saying he's "making all the right moves" in playing a bad hand.
The White House and Treasury Department have been under fire after revealing Tuesday that Geithner learned of the impending bonus payments a week ago; he told the White House about them last Thursday, and senior aides informed President Barack Obama later that day.
But news of the bonuses was publicized last fall, prompting questions about how genuine any of the outrage directed toward AIG really is.
In a letter to House Speaker Nancy Pelosi Tuesday, Geithner said he was working with the Justice Department to find ways to recover some of the payments. He cited a provision in the recent economic stimulus law that gave him authority to review compensation to the most highly paid employees of companies that already have received federal assistance.
He also said the Treasury Dept. will recoup the losses by deducting the $165 million from the most recent $30 billion given to AIG in government aid.
Meanwhile, the agency that oversees AIG said that, while its criticism of the company's practices had sharpened over the past five years, it failed to recognize the extent of risk posed by the exotic financial instruments the insurance company offered, many of them tied to a housing market that had long been rising.
Scott Polakoff, acting director of the Office of Thrift Supervision, said regulators failed to accurately predict what would happen to AIG's so-called credit default swaps - a form of insurance - if housing values collapsed, as they have. "There are a lot of people walking around who failed to understand how bad the real estate market had gotten," he said.
Earlier in the day, lawmakers directed most of their wrath against AIG.
"The federal government is a major owner of this company. We're the owners, not just the regulators," Rep. Frank said Wednesday on CBS' The Early Show.
Frank, said Congress should rewrite a Depression-era law that the Federal Reserve used to give AIG its initial government bailout.
"It is my hope that before much further, we will amend that statute," he said. Frank said the mere existence of the 1932 statute enabling the Fed to make the direct payment rendered a no-strings bailout as "a fait accompli."
Frank said at the hearing that Congress will be asking for the names of the bonus recipients, but if AIG declines to provide it, he will convene the committee to vote a subpoena for the names. "We do intend to use our power to get the names," he said.
Rep. Scott Garrett of New Jersey, the senior Republican on the subcommittee, complained that the administration still has no exit strategy for disentangling itself from the insurance giant.
"Part of me wants to say to some of the loudest critics, `What did you expect and why weren't you asking more questions before?' I would argue that the real outrage now is the $170 billion of taxpayer moneys that's been pumped into this company and to what effect," he said.
Rep. Gary Ackerman, D-N.Y., cited a "tidal wave of rage" throughout America right now.
AIG is under fire for $220 million in retention bonuses paid to employees in its troubled financial products division. The most recent payment of $165 million began to be paid last Friday and caused a furor.
According to The New York Post, AIG executives James Haas, Douglas Poling and Jonathan Liebergall all received bonuses, but an AIG spokesman told the paper Tuesday night, "I honestly don't know who got what."
Before Liddy's testimony started in the afternoon, he could be seen chatting with a handful of pink-clad female protesters that held up signs reading "crook" and "give the money back."
Before gaveling the session back in order, panel chair Rep. Paul Kanjorski, D-Pa., angrily told the protesters to lower their signs or leave the chamber.
"I'm a patient man, but don't try my patience," he said, raising his voice later to tell them "signs down!"
Kanjorski stopped testimony later when the signs reappeared and had security personnel confiscate them.
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