Anger mounts over AIG bonuses

Wednesday, March 18, 2009 at 10:06 AM Posted by Beijing News


The US government has demanded that insurance giant AIG repay the 165 million dollars it gave in executive bonuses while taking tens of billions in bailout funds.

Anger mounted over the bonuses ahead of an appearance by company's CEO Edward Liddy on Wednesday before irate US lawmakers.

Members of the House of Representatives subcommittee on capital markets were to grill Liddy over his decision to ignore government objections to the cash payments.

In a letter to House Speaker Nancy Pelosi late Tuesday, Treasury Secretary Timothy Geithner wrote that it was impossible to prevent the contractual bonuses from being paid and said it may be difficult to recoup the payments.

However Geithner said the government would "impose on AIG a contractual commitment" to repay the 165 million dollars to taxpayers.

He also said the same sum would be deducted from the 30 billion dollars pending from the American International Group's bailout of more than 170 billion dollars.

The capital markets subcommittee's Democratic chairman, Congressman Paul Kanjorski, warned that Liddy's job could be on the line as President Barack Obama grapples with public rage toward Wall Street.

"Mr Liddy either has to tell us what he's going to do to change this and give back these bonuses ... or else we should consider removing Mr Liddy and putting someone else in charge," Kanjorski told MSNBC television Tuesday.

"Mistakes were made at AIG, and on a scale that few could have imagined possible," Liddy acknowledged in an opinion article published in Wednesday's Washington Post.

"I am mindful of the outrage of the American public and of the president's call for a more restrained compensation system."

Liddy wrote that he would never have approved the bonuses if he had been CEO at the time the contracts were signed. "It was distasteful to have to make these payments," he wrote.

Liddy, former chief executive of the Allstate insurance firm, was tapped by the government to take over American International Group in September, two days after it was saved from bankruptcy with an 85-billion-dollar lifeline.

The bailout has since grown to 180 billion dollars. But it only emerged at the weekend that London-based traders with AIG's Financial Products Subsidiary who drove the company the brink were in line for staggering payouts.

Senate Majority Leader Harry Reid called the bonuses "repulsive" as millions of Americans agonize through the worst recession for decades.

"I can't imagine how this company, led by somebody that we brought in from the outside that had come out of retirement ... why he allowed this to happen. I had more confidence in him than this," he said.

The bonus contracts were drawn up last April, before the bailout and Liddy's arrival, but the CEO is under fire for claiming that the payments were not just legally correct but necessary to retain top staff.

New York Attorney General Andrew Cuomo revealed on Tuesday however that 11 executives had quit AIG despite being paid "retention" bonuses of at least a million dollars each to stay with the firm.

That disclosure has been overshadowed by the bonuses row. But lawmakers are vowing to press Liddy on the issue at Wednesday's hearing, contrasting the helping hand for foreign bankers to the plight of recession-hit Americans.





Conservatory & Botanical Gardens. AP Photo/Las Vegas News Bureau, Brian Jones

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