The CEO of American International Group Inc. (AIG) faced an angry panel of lawmakers Wednesday, in the midst of an uproar over $165 million given to AIG employees despite the fact that the embattled insurance giant is dependent on taxpayer funds. Edward Liddy announced a compromise on the bonuses at the hearing, stating that he is asking employees who received bonuses to return at least half of the compensation.
"This morning…I asked those who received at least $100,000 to give back at least half of their payments," Liddy told the committee.
Along with New York Attorney General Andrew Cuomo, Liddy noted that "we will work to ensure the highest level of employee participation," he added.
News that broke Tuesday that 73 AIG employees received bonuses of at least $1 million each, with 11 of those having left the company in the meantime has outraged lawmakers already upset over the bonus structure.
Of those 73 $1 million-plus bonuses, 7 employees received over $4 million and the top bonus was $6.4 million.
When questioned by House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Chairman Paul Kanjorski about the rationale behind distributing the bonuses, Liddy said that although $165 million is a big number, it is small when compared to the $1.6 trillion
"We thought that was a fair trade," he said.
"Mistakes were made at AIG on a scale few could have every imagined possible," Liddy said.
However, the bonuses, while "distasteful," should be upheld, Liddy said, due to their status as a contractual obligation.
"Because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful," Liddy said.
Members of the House Financial Services Subcommittee expressed their outrage over the bonuses at the hearing.
Representative Barney Frank, D-Mass., said that the time has come for the U.S. government, which controls 80 percent of the company, "to assert our ownership rights.
"We do intend to use our power to get the names" of the bonus recipients, Frank warned.
In his testimony, Liddy, who was appointed 6 months ago as part of the deal for the government to bail out the insurer, said that AIG plans to return the $170 billion in tax funds given to the insurer.
"When you owe someone money, you pay that money back," he said. "We at AIG want to believe that we are all in this together."
However, lawmakers were still upset, and voiced frustration over AIG's position as "too big to fail." Representative Scott Garrett, R-N.J., observed that there does not appear to be a way out of supporting the systemically important institution.
"Part of me wants to say to some of the loudest critics, 'What did you expect and why weren't you asking more questions before?' I would argue that the real outrage now is the $170 billion of taxpayer moneys that's been pumped into this company and to what effect," he said.
There is significant public anger over the bonuses, as the country faces an unemployment rate over 8 percent and a deepening recession. Liddy acknowledged the "nation's outrage" over AIG.
"No one knows better than I that AIG has been the recipient of generous amounts of governmental financial aid," Liddy said, adding that the public's patience is "wearing thin" over the bonuses.
"I want to assure you that the people at AIG today are working as hard as we can to execute the restructuring plan that, we believe, offers America's taxpayers the best possible income," Liddy told lawmakers.
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