AIG chairman and chief executive officer Edward Liddy
WASHINGTON – AIG CEO Edward Liddy said Wednesday that the company has asked employees in the financial products division who received bonuses of more than $100,000 to return at least half of the money.
Some employees have already pledged to return all of their bonuses, he said.
“We’ve heard the American people loudly and clearly,” Liddy said.
“We are acutely aware not only that we must be good stewards of the public funds we have received, but that the patience of America’s taxpayers is wearing thin,” Liddy said in testimony to a House subcommittee Wednesday.
As new details emerged about $165 million in bonuses paid by the bailed-out insurance giant, lawmakers and administration officials are seeking ways to recoup the money either by imposing stiff new taxes on the extra pay or requiring the company to return it in exchange for future taxpayer aid.
“We are essentially operating AIG on behalf of the American taxpayer so that we can maximize the amount of money we pay back to the government,” he said. “In order to do 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. Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful.”
Liddy, who was asked by the government in September to take over the failing insurer, said he had now seen the “bad side” of capitalism. “Mistakes were made at AIG on a scale few could have ever imagined possible,” he said. “Those missteps have exacted a very high price, not only for AIG, but for America’s taxpayers, the federal government’s finances and the economy as a whole.”
Liddy said the firm was working to wind down its financial products division, which was at the root of AIG’s problems, but also where the bulk of the bonus recipients work. But stress in financial markets had slowed the firm’s ability to sell the division’s assets, he said.
The value of the division’s derivatives business is now $1.6 trillion, down from $2.7 trillion.
Liddy also said the firm is working to cut its debt to the Federal Reserve, which first stepped in in September with the Treasury Department to boost the insurance giant on the brink of failure.
Also Wednesday, AIG said it may sell its Manhattan headquarters and a nearby office building. AIG spokesman Mark Herr said the company is evaluating the sale of 70 Pine Street and 72 Wall Street.
But the bonuses remain the central focus in the AIG situation. Lawmakers kicking off the hearing assailed the bonuses and pledged to try to get back the money, which was due to employees March 15.
“AIG now stands for arrogance, incompetence and greed,” said Rep. Paul Hodes, D-N.H.
“The taxpayer knows they are the ultimate sucker who pays for all of the greed that has been going in the marketplace for years and years,” Rep. Gary Ackerman, D-N.Y., said. Added Rep. David Scott, D-Ga.: “We have got to put a pause button on these bailouts and get to the bottom of this.”
President Obama also weighed in Wednesday, saying he wants Congress to pass legislation giving the government greater regulatory authority over financial institutions like AIG. Standing on the White House lawn as he prepared to go to California, Obama again assailed the company for its business practices and the executive bonuses.
Obama he and members of his economic council have commenced discussions with leading congressional players on legislation that would create another regulatory entity – along the lines of the Federal Deposit Insurance Corporation – to give the government more authority over financial institutions such as AIG.
He also expressed support for Treasury Secretary Timothy Geithner – who had come under criticism for his handling of the issue by Republican lawmakers, including Sen. Richard Shelby, R-Ala. – saying Geithner has “made all the right moves” in a bad situation.
Geithner promised in a letter Tuesday night to House Speaker Nancy Pelosi that Treasury will recover all the money.
Geithner said if Treasury is unable to force AIG employees to return the money, he will require the company to pay back the bonus money as a condition of receiving an additional $30 billion in taxpayer money promised earlier this month.
In his letter, Geithner acknowledged “considerable outrage” in Congress after a day when angry lawmakers proposed a series of ideas to recoup the money through higher taxes.
“If you don’t return it on your own, we will do it for you,” Sen. Charles Schumer, D-N.Y., warned the employees who received bonuses.
The level of hostility rose after New York Attorney General Andrew Cuomo reported Tuesday in a letter to Congress that 73 individuals at AIG received bonuses of $1 million or more Friday, including 11 who have left the company. AIG has described the bonuses as “retention payments” to keep good workers.
“Eleven of them left the company; they took the money and ran,” said Rep. Steve Israel, D-N.Y. “So much for the retention part of retention bonuses.”
Republican lawmakers including Shelby questioned why President Obama and Geithner did not take action to stop the bonuses earlier. Shelby told CBS’ Early Show it was another example of Geithner being “out of the loop.” Shelby asked, “Where was Treasury before this money was paid out?”
White House Press Secretary Robert Gibbs responded that Obama had “complete confidence” in Geithner.
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BY THE NUMBERS
• Top recipient received more than $6.4 million
• Top seven bonus recipients each received more than $4 million
• Top 10 bonus recipients received a combined $42 million
• 22 individuals received bonuses of $2 million or more, and combined, they received more than $72 million
• 73 individuals received bonuses of $1 million or more
• 11 individuals who received $1 million or more are no longer working at AIG, including one who received $4.6 million
Source: New York Office of Attorney General