AIG Chief: I've Asked Some Execs to Pay Back Bonuses

The head of American International Group told Congress he has called on some of the employees who received a total of $165 million in bonuses to voluntarily return at least half of the money due to public outrage over the payments.

Testifying at a congressional hearing, CEO Edward Liddy said that some workers already have stepped forward to give money back.

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Liddy, testifying before the House Financial Services Capital Markets Subcommittee, also said that decisions to pay the bonuses to AIG executives were made "in cooperation" with Federal Reserve officials.

"Everything we do we do in partnership with the Federal Reserve," Liddy said. "They have the ability to weigh in yea or nay on anything in discussion. "We've been talking about this within the board and with representatives of the Federal Reserve literally for three months."

AIG has come under intense fire from the public, politicians and President Barack Obama for accepting up to $180 billion in government aid and then handing out multimillion-dollar bonuses. But Liddy said the best hope for recouping taxpayer money was to keep AIG in business.

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"No one knows better than I that AIG has been the recipient of generous amounts of government financial aid," Liddy said.

"We have been the beneficiary of the American people's forbearance and patience. And 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," he said.

Fury over the bonuses threatens to undermine Obama's efforts to solve the credit crisis and pull the economy out of a deep recession. The president has said he might have to ask Congress for money beyond a $700 billion bailout fund approved in October.

AIG has argued that the payouts were necessary to retain top employees with the specialized knowledge to dispose of $2.7 trillion in complex securities that ended up dragging the company to the brink of collapse last year.

Liddy, who took over as chairman and chief executive six months ago when the government first stepped in to try to stabilize AIG, said the company had made mistakes "on a scale few could have ever imagined possible."

That stark admission did little to dull the anger directed toward him Wednesday.

Senate Republican leader Mitch McConnell called the bonus situation "an offense to the taxpayers, and we're going to get to the bottom of it, even if the Department of the Treasury hasn't."

New York Attorney General Andrew Cuomo said: "AIG's proposal to ask their bonus recipients to voluntarily give back half is simply too little too late...Rather than take half-measures, AIG should immediately turn over the list, which we have subpoenaed, of who got what and when."

Meanwhile, Attorney General Eric Holder said the Justice Department was working with the Treasury Department to determine how it might go about recovering employee bonuses paid by embattled insurance giant AIG.

"We're working with the Treasury Department to make them aware of what legal abilities they have," Holder told a news briefing.

Treasury Secretary Timothy Geithner said late Tuesday that AIG would have to promise to compensate taxpayers for the bonuses as a condition for receiving a planned $30 billion expansion of its bailout.

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. Read Geithner letter to the Hill Leadership.

But Geithner said anger toward Liddy was "unjustified" because he had joined AIG at the government's behest and the problems there predated him.

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.

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