AIG Chief Liddy Faces Congressional Grilling
American International Group chief executive Edward Liddy faces tough questions Wednesday on Capitol Hill when he will testify before the House Financial Services Committee on how taxpayers' money poured into the insurance giant has been spent.
On Tuesday, the Obama administration turned up the heat on AIG over its employee bonuses, saying the embattled insurer will be forced to repay U.S. taxpayers before it gets another bailout of $30 billion.
In Op-Ed piece in the Washington Post published Wednesday, Liddy acknowledged that mistakes were made at the insurance giant and vowed to do everything possible to give back the money to taxpayers, who had a right to be angry.
"The anger is understandable, and I share it," wrote Liddy, who took the reins of AIG bout six months ago and works for an annual salary of $1.
"No one knows better than I do that AIG has been the recipient of generous amounts of government financial aid," he wrote. "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."
The issue of bonuses for AIG employees took a new twist Tuesday, when it emerged that 11 of the employees who were received so-called retention bonuses of $1 million or more are no longer with the company, according to a letter from New York Attorney General Andrew Cuomo that was sent to Rep. Barney Frank, D-Mass.
In his letter, Liddy said the payments were made to prevent undue risk exposure as the company is winding down its Financial Products unit, which is at the root of the company's troubles, and that the bonuses were agreed before he became chief executive.
"Make no mistake, had I been chief executive at the time, I would never have approved the retention contracts that were put in place more than a year ago. It was distasteful to have to make these payments," he wrote.
Anger over bonuses adds to public criticism of AIG after it emerged that big European and US banks, which acted as its counterparties, benefited from a big chunk of the taxpayer rescue.
On Wednesday it emerged that hedge funds were also among the beneficiaries.
The government now holds about an 80 percent stake in AIG, a giant that once stood astride the financial system but is now surviving on three federal bailouts worth up to $180 billion.
Treasury Secretary Timothy Geithner said the Treasury would deduct $165 million paid out in bonuses from the $30 billion in additional taxpayer funds announced for AIG on March 2.
"We will continue our aggressive efforts to resolve the future status of AIG in a manner that will reduce the systemic risks to our financial system while minimizing the loss to taxpayers," Geithner wrote.