AIG chief faces tough questioning over 'retention bonuses'
Edward Liddy is praised by some lawmakers for taking on a tough task. But others excoriate him for large payments to those who helped bring down the company.
In a highly anticipated appearance on Capitol Hill today, CEO Edward Liddy said that he is urging employees to repay $165 million in "retention bonuses" at embattled insurance giant American International Group Inc.Skip to next paragraph
Subscribe Today to the Monitor
Reports of bonuses for a company on the receiving end of $170 billion in taxpayer bailouts outraged the public and members of Congress this week - and threaten to derail future bailouts.
Responding to the backlash - including death threats - Mr. Liddy said that he and New York Federal Reserve overseers had "great anxiety" before authorizing the payments.
"But the judgment we made was that the risk was too great, and we would lose all the progress we made, if we did not pay these bonuses," he said.
At issue is how to wind down a $1.6 trillion portfolio of toxic assets - without jeopardizing the public support needed to support ongoing government interventions.
"No one knows better than I that AIG has been the recipient of generous amounts of American aid," Liddy told a House Financial Services subcommittee. "We are essentially operating AIG on behalf of the American taxpayer so we maximize the amount we can pay back as fast as possible."
An ex-CEO of Allstate, Liddy was tapped by former Treasury Secretary Henry Paulson to head AIG in September 2008, after a $85 billion bailout gave the federal government a controlling stake in the company. Liddy froze executive salaries in November and set his own compensation at $1.
"We do not intend to harass you in this committee, nor should we," said Rep. Paul Kanjorski (D) of Pennsylvania, who chaired the Capital Markets subcommittee. He and several other panel members reminded viewers that Liddy had been "pressed into public service by the US government."
When he first learned of "potential bonus payments," Mr. Kanjorski said that he had warned Liddy that if the bonuses were paid, "it would jeopardize a second rescue plan that may be needed to save the American economy."