WASHINGTON — The chief executive of American International Group, trying to defuse the wrath of the public and politicians over millions of dollars in bonuses, told Congress Wednesday that he had just asked a few hundred employees of the beleaguered insurance company to give back at least half the extra pay.
Edward Liddy, brought in last fall to lead the giant firm the government had just rescued from the brink of insolvency, arrived on Capitol Hill with empathy for the outrage that has erupted over the bonuses — but not complete acquiescence.
“We’ve heard the American people loudly and clearly these past few days,” Liddy told an irate House subcommittee, saying that he found the bonuses “distasteful.”
But he defended the rationale behind the payments, totaling $165 million to AIG’s most troubled Financial Products division, reiterating that they were intended to prevent the company from collapsing by deterring vital employees from leaving the firm. He said that “some” of the Financial Projects employees already had returned their bonuses but did not specify how many. And asked by Rep. Barney Frank, D-Mass., to provide the names of those who have kept the money, Liddy balked, saying he feared for their safety in light of written threats, including one that said, “all the executives and their families should be executed with piano wire around their necks.”
Liddy went before a House subcommittee to try to stanch the latest crisis AIG has faced — spiraling public anger since the disclosure over the weekend that the company, which has received $170 billion in emergency federal funds, paid scheduled bonuses late last week. The bonuses included more than 70 of $1 million or more in the division responsible for the company’s downfall.
Liddy said he asked Financial Products employees who received at least $100,000 in bonuses to relinquish some of the money. But from the testy mood in the House hearing room, to the White House and the New York attorney general’s office, it was plain that AIG’s strategy was not containing the crisis.
Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Committee’s subcommittee, scolded the chief executive, saying the decision to go ahead with the bonuses promised in employee contracts could bring down the company — and ultimately others as well. Kanjorski pointed out that corporations that have received bailout funds are likely to run out of that money soon and will need to ask the government for more.
“Do you realize that the actions that you take at AIG,” Kanjorski told Liddy, ” … may have jeopardized our ability to get a majority of this Congress to support further largesse to provide funds to prevent a recession, depression or meltdown?”
The House scheduled a vote for today on a measure that would impose an income tax of 90 percent on bonuses that AIG employees received this year. And the Senate Finance Committee is preparing separate legislation that would capture 90 percent of the bonus money through excise and income taxes. Attorney General Eric Holder announced Wednesday that the Justice and Treasury departments had begun jointly exploring “tools” to recover the bonuses.
Meanwhile, New York state’s attorney general, Andrew Cuomo, continued to lash out at AIG, saying that Liddy’s request that employees return part of their bonus money “is simply too little to late.”
Cuomo’s office said that 418 Financial Projects employees have received the new bonuses and that 298 of them were paid at least $100,000.
The once-storied division at the center of the storm, AIG Financial Projects, nearly brought down its corporate parent, the world’s largest insurance company, through billions of losses in its credit default swap business. In that business, the division insured risky mortgage investments by other banks and corporations and considered the insurance premiums its clients paid to be “free money,” never expecting those investments to lose value.
In his opening remarks before Congress, Liddy emphasized that he understood the anger that has welled up.
“We are acutely aware not only that we must be good stewards of the public funds we have received but that the patience of the American — of America’s taxpayers is, indeed, wearing thin,” said Liddy, who came out of retirement at government request to become AIG’s chairman and chief executive for $1 per year. “The payment of large bonuses to people in that very unit that caused so much of AIG’s financial troubles does not sit well with the American taxpayer in any way, shape, or form and for a good reason.”
He predicted, wistfully, that many executives will “return the bulk of the money that’s been given them, and it will come with their resignations.”
Dozens of employees at the Financial Products division, reached at their offices or homes, declined to comment on the public outrage over the bonus payments — or whether they would give back the money. A few pleaded that their names not be publicized, saying they were afraid for their families’ safety.
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