Edward Liddy, chief executive officer of American International Group (AIG), sought to blunt the outpouring of criticism over $165 million paid in retention bonuses at the beleaguered company, by asking many of the people who received them to return at least half the money. Some have already volunteered to turn in their full bonuses, Liddy told a House panel in Washington on Mar. 18.
Liddy, who took the job running AIG last September for $1 a year in pay, also said he expected a harsh public reaction to the retention bonuses but nothing like the firestorm he has seen. The fracas over them dominated a questioning at a hearing of a finance subcommittee, and President Barack Obama has urged that AIG be forced to rescind the payments.
Liddy stopped short of saying he would pursue the payments if staffers decline to return the money. He argued that he had to make the payments both because of contracts—which he said he never would have O.K.'ed—and because they have been needed to keep people on to unwind a troublesome area that had the potential to throw AIG into bankruptcy. "We concluded the risk to the company, and therefore [to] the financial system and the economy, were unacceptable," the CEO said.
Liddy sparred, mostly in polite terms, with congresspeople who repeatedly attacked the idea that bonuses should be paid to staffers at a company where bad market decisions have led to losses and the need for at least $80 billion in U.S. government support already—with more than $170 billion in potential exposure.Contentious Proceedings
At times, however, he grew passionate. He declined to turn over names of the bonus payment recipients, for instance, and cited threats that have been made to AIG executives. One such threat suggested that they be killed with piano wire. He did, however, suggest that he would comply with subpoenas from the New York State Attorney General to reveal the names, so long as they are kept confidential. He said he would want assurances of confidentiality from the House before taking the same step there—to which Finance Committee Chairman Barney Frank refused to agree.
Passions around the issue even crept into the hearing room. Subcommittee Chairman Representative Paul Kanjorski (D-Pa.) angrily ordered demonstrators to turn over to security officers signs urging jail terms for AIG executives. The demonstrators, which Kanjorski referred to as the pink ladies because of their bright clothing and signs, had been trying to get their signs in the sights of cameras that crowded the hearing room.
The CEO suggested that the government will be paid in full for its loans and other support to AIG but that the process may take two to three years, depending on market conditions. Liddy is trying, for instance, to sell off insurance units—which other witnesses at the hearing suggested were healthy—but said there are no buyers for them at the moment.
He suggested that improvements at AIG have been substantial already, but that the job is far from finished. The company's troubled financial products unit, which created complex obligations known as credit default swaps among others, still has some $1.6 trillion in obligations to wind down. While down substantially from what the tally was just last fall, Liddy said the company needs to deal with those, and it needs to keep the people who can manage the total down.