Privacy Policy

2009-04-03T18:41:00.000-07:00

Privacy Policy for www.economicvalue.blogspot.com

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At www.economicvalue.blogspot.com, the privacy of our visitors is of extreme importance to us. This privacy policy document outlines the types of personal information is received and collected by www.economicvalue.blogspot.com and how it is used.

Log Files
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Cookies and Web Beacons
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AIG Review

2009-04-03T18:30:00.000-07:00

WASHINGTON (AP) — The head of insurance giant AIG told furious members of Congress that some of the firm's executives have begun returning all or part of bonuses totaling $165 million paid out while the company was in hock to American taxpayers for billions.

Edward Liddy said Wednesday he had asked recipients of more than $100,000 to return at least half, but offered no details.

He was still fielding their questions when House Democratic leaders announced plans for a vote Thursday on legislation to tax away 90 percent of the extra pay for executives at American International Group Inc. and many other bailed-out firms.

Liddy, who took over as CEO and chairman of the company at the government's request when AIG appeared ready to collapse, said he, too, was angry about the bonuses. He said he asked recipients of more than $100,000 to return at least half, and added that some have "already stepped forward and returned 100 percent."

He did not respond directly when advised in pungent terms to pay to the Treasury all the money handed out last weekend in "retention payments."

AIG has taken $170 billion in federal bailout money since the U.S. financial crisis erupted late last year with the collapse of the housing market, accelerating a recession that has reached depths not seen since World War II.

Overall, AIG has paid $220 million in retention awards to its financial products employees — $55 million in December and $165 million had to be paid this month.

In remarks before leaving for California, President Barack Obama again assailed AIG's business practices but said he was ultimately responsible even though the AIG catastrophe developed before he took office. "The buck stops with me," he said.

The financial bailout program remains politically unpopular and has weighed down on Obama's new presidency, even though the plan began under former President George W. Bush. It also could hamper any attempts Obama may make to wrest still more financial bailout money from Congress. He has said such money likely would be needed.

Obama spoke as congressional Democrats worked on legislation designed to recoup most or all of the $165 million by exposing it to new taxes.

Obama disclosed, meanwhile, that he and members of his economic council have started talks with leading lawmakers on legislation that would create a new regulatory entity — like the Federal Deposit Insurance Corp. — to give the government more authority over such financial institutions as AIG.

Obama said he was not trying to quell anger. "I think people have a right to be angry. I'm angry," he said.

In the Capitol shortly after Obama spoke, many members of the House of Representatives subcommittee commended Liddy for taking the thankless job for $1 a year. Most members of the subcommittee refused to accept Liddy's explanation that the bonus payments were required under contracts with employees whose departure would have only deepened the company's spiral toward a calamity.

The government has intervened heavily, fearing that AIG's collapse could have unraveled America's, and, perhaps, the global financial system.

So far, AIG has been under the supervision of the Federal Reserve, the U.S. central bank that acts without administration or congressional sanction. Liddy said Fed representatives were informed of and had signed off on the bonuses well before they were made public last weekend by Treasury Secretary Timothy Geithner.

Liddy said there "was great angst over the payment of these bonuses, believe me, on — on all of our parts, including the Federal Reserve."

Nevertheless, he continued, "the judgment we made was the risk was too great that we would lose all the progress we made if we didn't pay these bonuses."

Liddy said the bonus recipients had been responsible for cutting about $1 trillion out of AIG — and, therefore, taxpayer — exposure to losses.

He further told lawmakers he believed much of the remaining $1.6 trillion in questionable and complex investment instruments being handled by that sector of the company could be recouped and returned to the government to reduce AIG debt.

He explained that the bonuses that were paid were obligations under contracts signed more than a year and a half ago with account managers who were hired to handle specific "books of business." The bonuses were agreed on to keep those managers in the job past the expiration of their contracts — most of which he said expired late last year — while they closed out particular investment packages.

To have reneged on those bonus agreements, Liddy explained, could have left massive accounts without experienced managers and led to even greater losses for the company.

AIG now is 80 percent owned by the government, meaning any profit or loss directly effects long-term taxpayer indebtedness. Members of Congress said their anger was a reflection of the fury felt by their constituents.

An example of the kind of heat generated during the hearing came in an exchange between Liddy and Rep. Stephen F. Lynch, a Massachusetts Democrat.

After Lynch ran through a series of allegations about AIG in which he used the word "you," Liddy responded:

"You have generously used the word 'you' in that construct. As I mentioned, these contracts were all put together before I was at AIG. I would not have done these contracts this way. And this whole arrangement would have looked — if it existed — would have looked a whole lot different. So I really do — I take offense, sir, at the use of..."

Lynch interrupted to say, "Well, offense was intended. So you take it rightfully, sir."

Shortly before Liddy was grilled, Obama strongly defended Geithner, his treasury secretary, who learned of the bonuses earlier this month and is under intense criticism for failing to stop the payments and agreeing with AIG that most of the money was paid under contractual obligations made during the administration of President George W. Bush, Obama's predecessor.

"He is making all the right moves in terms of playing a bad hand," Obama said, adding that it was up to the government and Congress to give the secretary the regulatory tools to work through the country's current economic crisis and to make sure it is not repeated.

The White House announced later Wednesday that Obama is planning a prime-time news conference on Tuesday.

(Source : http://www.reviewonline.com)

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AIG Review