WASHINGTON The chief of failed insurance conglomerate AIG acknowledged Wednesday to skeptical congressional interrogators that the company's multibillion bonuses to employees were "distasteful" to many Americans including himself and that "I share that anger." Lawmakers from both parties expressed fury over the company's behavior.
"Mistakes were made at AIG on a scale few could have every imagined possible," Edward Liddy, chairman and chief executive officer of the American International Group Inc., said in prepared testimony.
But, he told a House Financial Services subcommittee, the $165 million in bonuses paid out over the weekend should be honored as a legal commitment of the United States government, which now owns 80 percent of the battered insurer.
"When you owe someone money, you pay that money back," he said. "We at AIG want to believe that we are all in this together," said Liddy, who was named six months ago to take over the company as part of the government rescue. Some $170 billion in tax money has now been pledged to AIG.
Liddy's stance on this issue drew sharp comments from both sides.
For the American public, AIG now stands for "arrogance, incompetence and greed," said Rep. Paul Hodes, D-N.H.
It is "time for us to assert our ownership rights," said Rep. Barney Frank, D-Mass., chairman of the full committee. Frank said 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.
Liddy found himself the reluctant defender of princely employee bonuses that members of Congress and much of the American public find indefensible.
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.
Liddy acknowledged, "We are meeting today at a high point of public anger."
"Because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful," Liddy said in his prepared testimony.
He told lawmakers that the company grew into an internal hedge fund that became overexposed to market risks. AIG 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 told lawmakers, "I want to assure you that the people at AIG today are working as hard as we can to execute the restructuring plan that, we believe, offers America's taxpayers the best possible income."
But the payments went out. Congress is in a lather and wants the money back. And Liddy, who had been scheduled to testify about AIG before the bonus story took root, was a timely target.
The clamor over compensation overshadowed AIG's weekend disclosure that it used more than $90 billion in federal aid to pay out to foreign and domestic banks, including some that had multibillion-dollar U.S. government bailouts of their own. AIG is the single largest recipient of government assistance a company whose financial transactions were so intricate and intertwined that it was considered simply too big to fail.
Liddy said the company's new management team found that the company's "overall structure is too complex, too unwieldy and too opaque for its component businesses to be well managed as one company."
He said the new managers have "addressed our liquidity crisis and stabilized the company's cash position" and is winding down the financial products side of the business.
Lawmakers already were troubled by the idea of an institution that could single-handedly topple the financial system. Now, Liddy's appearance comes just as lawmakers from both parties are casting his company as the symbol of excess and abuse of taxpayer dollars.
The White House and Treasury Secretary Timothy Geithner, both of whom have condemned the payments, have been besieged by questions about why they did not know about the bonus payments sooner.
The White House for the first time on Tuesday night said Geithner learned of the impending bonus payments a week ago Tuesday; he told the White House about them last Thursday, and senior aides informed President Barack Obama later that day.
Geithner said on Tuesday 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.