Why AIG Stumbled, And Taxpayers Now Own It

Steve Kroft Reports On The Troubled Insurance Giant, And Talks To Its New CEO

Of all the corporate bailouts that have taken place over the past year, none has proved more costly or contentious than the rescue of American International Group (AIG). Its reckless bets on subprime mortgages threatened to bring down Wall Street and the world economy last fall until the U.S Treasury and the Federal Reserve stepped in to save it.

So far, the huge insurance and financial services conglomerate has been given or promised $180 billion in loans, investments, financial injections and guarantees - a sum greater than the annual cost of the wars in Iraq and Afghanistan.

In return the U.S. taxpayers have been given a 79 percent equity stake in the company. We are now AIG's largest shareholder. We have 116,000 loyal employees who had nothing to do with this mess, some valuable insurance assets, and a new CEO, Edward Liddy, who says his only mission is to get our money back.



Will AIG ever pay us back? BNET.com columnist Ed Leefeldt weighs in on the issue for 60 Minutes.com.




"I think we have almost a unique place, and not a very desirable place, in terms of the anger and frustration that Americans feel about bailouts. You know, individuals aren't being bailed out. Why should a company be bailed out? So I understand it. We're just trying to do the best we can to pay back the taxpayer," Liddy told 60 Minutes correspondent Steve Kroft.

For the past eight months, Liddy's job has been to prevent AIG from collapsing: trying to extricate the company from its disastrous trades, and selling off the crown jewels of what was once one of the world's great businesses, all to satisfy its massive debt to Uncle Sam.

"Are there people from the government on this floor?" Kroft asked Liddy.

"There aren't people from the government on this floor. But I would guess today, there's probably 20, or 30, or 40, or 50 people either in our building or over at the Federal Reserve, which is a couple of blocks away, worrying and thinking about things related to AIG. They come to our board meetings. They come to our committee meetings. We have them in any strategic meetings, any decisions to buy assets, to sell assets. They're involved in those," he explained.

It's a thankless job that Liddy neither sought nor particularly wanted. He had retired from the chairmanship of the Allstate insurance company and was serving on the board of Goldman Sachs when Treasury Secretary Hank Paulson, Goldman's former chairman, asked him to take over AIG.

Liddy agreed to do it for a salary of one dollar a year

Asked what ever possessed him to take the job for a dollar a year, Liddy told Kroft, "First, I think, like much of your audience, if somebody calls and says, 'Could you please help your country?' people say, 'Yes.' With respect to a dollar a year, I knew I'd have to make some tough decisions. I didn't want in any way, shape, or form people to question my integrity, my honesty as to why I was doing it."

"Did you have any idea what you were getting into?" Kroft asked.

"In some regards, I did, and in some regards, I didn't. So certainly understanding how to restructure a company, I've done that before. The political issues, how you relate to the Federal Reserve or Treasury, or the Congress, that's new and sometimes terrifying to me," Liddy said.

"Especially the Congress," Kroft remarked.

"Especially the Congress, yes," Liddy replied.

Congress raked him over the coals for paying out $165 million in bonuses to some of the very people who helped wreck AIG. The bonus deals had been signed before Liddy got there.

"It's difficult to sit there and have 30 or 35 people throwing barbs at you, and really not appreciating that you're on their side and you're trying to help," Liddy said.

Asked if he knew how bad things were at the company when he took the job, Liddy told Kroft, "No, no, not at all."

Not long after he arrived, AIG reported the largest quarterly loss in U.S. history - more than $60 billion during the final three months of last year.

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