With public anger over the conduct of insurance giant American International Group, the recipient of nearly $200 billion in American taxpayers' funds, at a boiling point after the weekend's disclosure of millions paid in bonuses, CEO Edward Liddy found himself buffeted by a key congressional panel today. And, in a surprise move, he said that today he asked recipients of bonuses worth more than $100,000 to return half of the money. But that did little to mollify lawmakers, who are angry at the lack of transparency and communication over the decisions.
Criticism of AIG's conduct has mounted over the past few months, but it reached new levels after revelations that the company paid $165 million in bonuses to 418 top executives just last week. That number includes 73 people who received more than $1 million. The news has infuriated taxpayers, who now own an 80 percent share in the company.
Liddy, who became the company's CEO after the bailout, is making only $1 for his work at AIG this year, and he wasn't involved in drawing up the 2007 contracts that required the bonuses to be paid out. Even so, he has become the most visible target for public (and political) anger. That's something that several legislators noted, with New York Democrat Rep. Gary Ackerman saying he apologized on behalf of the American people for the threats and insults Liddy has had to field.
Liddy's biggest move before the panel was to say that, this morning, he asked all employees who received bonuses worth more than $100,000 to give at least half of that money back. He's also asked the leaders of AIG Financial Products to return 100 percent of their bonuses. Some, he said, have already volunteered to do so. "Make no mistake. If I had been CEO at the time, I would never have approved the retention contracts put in place," he said. "It was distasteful to have to make these payments."
In the course of his testimony, Liddy also emphasized that the decision wasn't made stealthily but that the Federal Reserve knew of the payments during the previous three months of discussion. Federal Reserve Chairman Ben Bernanke, he said, had been consulted throughout. Treasury Secretary Timothy Geithner, meanwhile, has said he was unaware of the payouts until last week. That's lifted the eyebrows of many who wonder how such miscommunication could be occurring.
The money was paid out initially, Liddy said, because he feared employees would resign, something that he thought could threaten the department and its $1.6 trillion derivatives business. And now, he said, he fears that many executives of AIG Financial Products will return the money at the same time as they tender resignations.
Still, Liddy's testimony did little to allay lawmakers' criticisms. House Financial Services Committee Chairman Barney Frank, a Democrat from Massachusetts, pointed out that the people who had made some of AIG's biggest mistakes were hardly the ones to be retained. And he requested the names of those people who haven't returned their bonuses. When Liddy asked that the names be kept confidential on the basis of the employees' safety, Frank refused, threatening to subpoena AIG for the names.