WASHINGTON, March 18, 2009
AIG CEO Seeking Return Of Some Bonuses
Edward Liddy Concedes Bonuses Are "Distasteful"; Says Some Workers Have Already Given Money Back
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Play CBS Video Video AIG CEO Calls Bonuses 'Distasteful' "CBS News RAW:" Edward Liddy, the chairman and chief executive officer of AIG, explains why millions in bonuses have been given to the financial unit that caused the company's problems.
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Video Give Back Money Or Else, AIG Lawmakers are insisting that they will go after AIG executives if they do not voluntarily return bonuses. Nancy Cordes reports.
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Video Barney Frank Slams AIG Maggie Rodriguez spoke with House Financial Services Chairman Rep. Barney Frank, D-Mass., about the House's plan to get back federal money AIG used for executive bonuses.
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With CodePink protestors in the background, AIG Chairmen Edward Liddy waits to testify on Capitol Hill in Washington, Wednesday, March 18, 2009, before the House Capital Markets, Insurance and Government Sponsored Enterprises subcommittee. (AP Photo/Susan Walsh)
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AIG Chairman Edward Liddy arrives on Capitol Hill in Washington, Wednesday, March 18, 2009, to testify before the House Capital Markets, Insurance and Government Sponsored Enterprises subcommittee. (AP Photo/J. Scott Applewhite)
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Timeline Bailing Out AIG Events pertaining to the insurance giant since it began receiving massive amounts of cash from the U.S. government.
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In-Depth Q&A: AIG Answers to some key questions about the insurance giant's latest bailout boost.
Testifying under oath at a congressional hearing as intense as any in recent memory, Edward Liddy said that some workers there already have stepped forward to give money back.
Liddy, who is chairman and chief executive officer of AIG, told a House subcommittee that the bonuses could be defended legally as a legal obligation of the company. But he also said that given the national uproar, he asked those who got "retention payments" over $100,000 to return at least half of it.
That wasn't enough for lawmakers, reports CBS News correspondent Nancy Cordes. Many remain furious that executives would get any bonuses after their unit brought the insurance giant to its knees, requiring a $180 billion public rescue.
"I am now asking you to send us the names of those who have received bonuses who have not given them back," demanded Rep. Barney Frank, D-Mass.
Liddy told Frank he could only do that if the list of recipients would remain confidential.
Frank's reply: "I won't give you that assurance, sir. And so if that's the condition it would be my intention to ask this committee to subpoena them"
New York attorney general Andrew Cuomo beat him to the punch with a subpoena of his own.
But Liddy said making the names public in this environment would put the recipients' lives at risk, Cordes reports, adding that some are already getting death threats. He read one before the House panel: "All the executives and their families should be executed with piano wire around their necks."
Liddy acknowledged that the company's multimillion-dollar bonuses were "distasteful."
"I share that anger," he said, adding that he knows "the patience of the American taxpayers is wearing thin."
The retention payments - ranging from $1,000 to nearly $6.5 million - were not his idea. Liddy himself is not getting a bonus and is only drawing $1 a year in salary. The deals were cut early last year, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company.
Lawmakers from both parties expressed fury over the company's behavior. For the American public, AIG now stands for "arrogance, incompetence and greed," said Rep. Paul Hodes, D-N.H.
Liddy told lawmakers that the company grew into an internal hedge fund that became overexposed to market risks. AIG, which announced it's putting its New York City headquarters up for sale, is the largest recipient of federal government emergency assistance.
"No one knows better than I that AIG has been the recipient of generous amounts of governmental financial aid. We have been the beneficiary of the American people's forbearance and patience," Liddy said. But he also said that "we have to continue managing our business as a business - taking account of the cold realities of competition for customers, for revenues and for employees."
He also said that the some of the roughly $165 million in bonuses paid out over the weekend is necessary to keep afloat the financial services division - the part of the company that has caused AIG much of its financial distress. Otherwise, Liddy said, the company's ability to repay the American people would be damaged.
"I'm trying desperately to prevent an uncontrolled collapse of that business" in order to pay taxpayers back, he said.
Liddy is a former Allstate CEO who came out of retirement at the government's request six months ago to run AIG for a dollar a year.
He struggled to explain why his executives' contractual bonuses were sacrosanct when workers in so many other industries - aviation, automotive, trucking - have seen their contracts broken.
But Liddy surprised lawmakers when he pointed out the Federal Reserve has known about the pending bonus payments for months.
"There is no attempt to do anything under the stealth of darkness or undercover," he said. "We wanted to do what was right in these contracts."
On Wednesday, President Barack Obama waded further into the matter, saying that while no one in his administration created AIG mess, the "buck stops with me" to fix it.
Standing on the White House lawn as he prepared to go to California, Mr. Obama again called AIG's executive bonuses "outrageous." But he said the problem goes deeper than that.
"Just as outrageous is the culture that these bonuses are a symptom of, that has existed for far too long: excess greed, excess compensation, excess risk-taking," he said.
"As we work toward getting ourselves out of the recession, I hope that Wall Street and the marketplace doesn't think that we can return to business as usual," he said.
Mr. Obama said he wants legislation providing greater control over financial institutions and indicated a new "resolution authority" for AIG-type giants is on a fast track to creation.
The president also gave Treasury Secretary Timothy Geithner a vote of confidence, saying he's "making all the right moves" in playing a bad hand.
(CBS)
The White House and Treasury Department have been under fire after revealing Tuesday that Geithner learned of the impending bonus payments a week ago; he told the White House about them last Thursday, and senior aides informed President Barack Obama later that day.
But news of the bonuses was publicized last fall, prompting questions about how genuine any of the outrage directed toward AIG really is.
In a letter to House Speaker Nancy Pelosi Tuesday, Geithner said he was working with the Justice Department to find ways to recover some of the payments. He cited a provision in the recent economic stimulus law that gave him authority to review compensation to the most highly paid employees of companies that already have received federal assistance.
He also said the Treasury Dept. will recoup the losses by deducting the $165 million from the most recent $30 billion given to AIG in government aid.
Meanwhile, the agency that oversees AIG said that, while its criticism of the company's practices had sharpened over the past five years, it failed to recognize the extent of risk posed by the exotic financial instruments the insurance company offered, many of them tied to a housing market that had long been rising.
Scott Polakoff, acting director of the Office of Thrift Supervision, said regulators failed to accurately predict what would happen to AIG's so-called credit default swaps - a form of insurance - if housing values collapsed, as they have. "There are a lot of people walking around who failed to understand how bad the real estate market had gotten," he said.
Earlier in the day, lawmakers directed most of their wrath against AIG.
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AIG CEO
"The federal government is a major owner of this company. We're the owners, not just the regulators," Rep. Frank said Wednesday on CBS' The Early Show.
No one knows better than I that AIG has been the recipient of generous amounts of governmental financial aid. We have been the beneficiary of the American people's forbearance and patience.
Edward Liddy,AIG CEO
Frank, said Congress should rewrite a Depression-era law that the Federal Reserve used to give AIG its initial government bailout.
"It is my hope that before much further, we will amend that statute," he said. Frank said the mere existence of the 1932 statute enabling the Fed to make the direct payment rendered a no-strings bailout as "a fait accompli."
Frank said at the hearing that Congress will be asking for the names of the bonus recipients, but if AIG declines to provide it, he will convene the committee to vote a subpoena for the names. "We do intend to use our power to get the names," he said.
Rep. Scott Garrett of New Jersey, the senior Republican on the subcommittee, complained that the administration still has no exit strategy for disentangling itself from the insurance giant.
"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.
Rep. Gary Ackerman, D-N.Y., cited a "tidal wave of rage" throughout America right now.
AIG is under fire for $220 million in retention bonuses paid to employees in its troubled financial products division. The most recent payment of $165 million began to be paid last Friday and caused a furor.
According to The New York Post, AIG executives James Haas, Douglas Poling and Jonathan Liebergall all received bonuses, but an AIG spokesman told the paper Tuesday night, "I honestly don't know who got what."
Before Liddy's testimony started in the afternoon, he could be seen chatting with a handful of pink-clad female protesters that held up signs reading "crook" and "give the money back."
Before gaveling the session back in order, panel chair Rep. Paul Kanjorski, D-Pa., angrily told the protesters to lower their signs or leave the chamber.
"I'm a patient man, but don't try my patience," he said, raising his voice later to tell them "signs down!"
Kanjorski stopped testimony later when the signs reappeared and had security personnel confiscate them.
More AIG Related Coverage:
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Add a Comment See all 173 Comments
- Instead of bonuses for these serial killers ( CEOs ) we should give them bullets in their heads.That's the Japanese's way
- Reply to this comment
- tj217, this latest round of bonuses has nothing to do with "conservatives" This round is all liberal, remember the libs took complete control this last November? According to CBS News?leftwing central, the present administration allowed for the bonuses by the negotiated changes they made to the bail out bill. Obama even took responsiblity yesterday at his town hall meeting in California. But hateful blinded lib ingrates like yourself have never let facts get in the way of your twisted blather and rhetoric.
- Reply to this comment
- All of you Obama haters are pathetic at best. All of the arrangements and contracts for these bonuses were made while your hero Bush was still pretending to be President. Be sure not to miss Rush today. He will tell you what to believe tomorrow.
- Reply to this comment
- Let's see...
1. Obama and Dodd receive mucho campaign dollars from AIG. More than any other politicians in 2008.
2. Obama picks Geitner for Treasury despite Geitners's abject failure as head of the NY Fed and his gross negligence in failing to pay taxes.
3. Obama stands by Geitner despite the public outcry and unnecessary damage to Obama's image in month 1 of his presidency.
4. Geitner tells Dodd to save the AIG bonuses by burying the provision in the Stimulus Bill. It is nearly certain that the biggest bonus winners are those AIG decision makers who approved and paid the campaign donations.
5. The Stimulus Bill is rushed through because of a "crisis in the economy" allowing no one to read or critique the details. Despite the urgency, Obama waits 4 extra days to sign it so he can enjoy Valentines Day in Chicago.
Nah! This isn't a scandal. Obama isn't a liar. We should talk about Bush now. What a horrible president. - Reply to this comment
- Obama is the most facinating person he knows.
He can listen to the sound of his own voice for hours.
Thank goodness I have tivo and can entertain myself with something with a little more substance. - Reply to this comment
- I think we need to institute a clause any time "bailout fund payments" are made which covers how those funds will be tracked. An independent group really needs to audit the documents BEFORE any bailout and during the payment process.
- Reply to this comment
- "Such is our precarious position.
Because as a people we have abandoned everything it means to be American.
Distributing cash as if it were justice.
And victory."
SearingTruth
A Future of the Brave - Reply to this comment
- Our outrage should be with our government for giving more money to AIG without specific, binding agreements from AIG not to give the bonuses or wasteit on parties, etc. as they had done with the first round of money.
We have a bunch of incompetents running our nation and their mock "outrage" at AIG is to deflect the attention away from themselves and their failures. Geitner and Obama both knew about the bonus agreement months ago.
Furthermore, AIG has passed a lot of the money given to them on to Goldman Sachs and banks in other countries. They are being used to launder "thank you" money from those in power and we are being played as suckers. - Reply to this comment
- "History is replete with examples of its own iteration."
SearingTruth
A Future of the Brave - Reply to this comment
- "Dead wrong Tearingtruth he will save your sorry and complaining rear end that does not want to move and is growing at a rapid rate like those funny monty pythons with the status quo....."
shazmichamps7
Gosh.
So Ron Pauls position, which is to eliminate all legal protections for the poor, and proclaim anything the rich wish to do legal, is somehow different than what we have today?
ST
"Compassion requires the greatest strength of all."
SearingTruth
A Future of the Brave - Reply to this comment
- "Don't go wating your Emotions lay all your faith on Ron paul............"
shazmichamps7
Ron Paul is pure evil.
And would simply deliver our great nation to the likes of AIG and their corporate brethren, without recourse, forever.
ST
"DOW 14,000. On the backs of everyone with strength enough to spit."
SearingTruth
A Future of the Brave - Reply to this comment
- "There were many concerting interests.
But I just wanted America back."
SearingTruth
A Future of the Brave - Reply to this comment
- I don't think Congress got it today. What this guy said is no matter what we do with bonuses, you can't do anything about it because you can't let us fail. You have too much taxpayer money at risk to let us fail. 167 million is nothing compared to the billions that would be lost if we went bankrupt. This guy is smart. They can keep giving the bonuses using the same reasons and this Democratic Congress will do nothing but give them more taxpayer money.
- Reply to this comment
- "We were easily felled. For our Democracy became words upon paper, instead of conviction within our hearts."
SearingTruth
A Future of the Brave - Reply to this comment
- THIS MAN IS GOOD!!!
Just when Republican snakes had circled President Obama and were licking their chops with anticipation of an Obama sandwich; the President flies out of Washington D.C. to surround himself with the American people; then elegantly, and artfully, and in ways George Bush could never hope, explains in basic layman's term how AIG became a disaster and how Obama is really trying to fix it so it will never happen to the American people again.
This Man is Good!
Oh GOD How I Love This Man!!! - Reply to this comment
- President Barack Obama: "The buck stops with me".
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Wow! He is good!
In a single swoop, President Obama took ownership of the AIG bailout bonus debacle, all while defanging the Republican snakes and providing cover for Sen. Dodd and the Democratic Party that voted for the stimulus bill without "bailout bonus restrictions".
The Man is Good!!!
May GOD Bless the United States of America!
May GOD Bless the Obama-Biden-Clinton-Gates Leadership Team! - Reply to this comment
- President Barack Obama: "The buck stops with me".
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Whoa! He is good! In single a swoop, President Obama took ownership of the AIG bailout bonus debacle, all while providing cover for Sen. Dodd and the Democratic Party that voted for the stimulus bill without "bonus restrictions".
The man is good!!!
May GOD Bless the United States of America!
May GOD Bless the Obama-Biden-Clinton-Gates Leadership Team! - Reply to this comment
- Of course the joke in the end is on us for Congress will likely spend more time talking about the $165 million in bonuses these faceless AIGers received than they did debating ? and, maybe more important, reading! ? the $787 billion stimulus bill.
- Reply to this comment
- Obama is to blame for the A.I.G. giveaway! He only now says something. He knew for a year that these bonuses were going to happen. Its the elitist way!
Posted by Obamanation_X at 6:16 PM : Mar 18, 2009
Oh please!
Who was the 1st one to pay AIG? Bush!
Go to http://www.nytimes.com/2009/03/17/business/17bailout.html?scp=1&sq=bailouts,%20bonuses%20and%20outrage&st=cse and click on the graphic entiled "Bailouts, Bonuses and Outrage" down on the left. You'll find a timeline that shows when billions were paid to AIG.
PS?Only about 1/6 was agreed to be paid under Obama's administration. - Reply to this comment
- Obama is to blame for the A.I.G. giveaway! He only now says something. He knew for a year that these bonuses were going to happen. Its the elitist way!
Posted by Obamanation_X at 6:16 PM : Mar 18, 2009
Actually, it started with Bush and Paulson wanting $700 Billion back in Sept of 2008.
Oh you remember McCain suspending his campaign to help push the Bailout through...
Flashback: It Was Bush, GOP That Opposed Executive Compensation Caps
It is a rather curious spectacle to see congressional Republicans express outrage at the exorbitant bonuses being handed out by bailed-out companies and blame the Obama administration for failing to curb the practice with AIG. Because when the first installment of the Troubled Asset Relief Program was passed it was the Bush administration and GOPers in Congress who were insisting that caps on executive compensation not be part of the legislation.
As the New York Times reported at the time that TARP was being crafted, "Congress and the administration remained at odds over the demands of some lawmakers, including limits on the pay of top executives whose firms seek help."
Former Treasury Secretary Hank Paulson said that while he was upset with the levels of salary afforded to top executives, any cap on such would dissuade companies from participating in the TARP.
"If we design it so it's punitive and so institutions aren't going to participate, this won't work the way we need it to work," he told Fox News Sunday on September 21.
Senator Richard Shelby, the top Republican on the Senate Banking Committee, told CBS news that: "It should be up to the board of directors of a private corporation to set the compensation of an executive; it shouldn't be Congress's role."
Senator Mel Martinez told CNBC that: "While it is very appealing to think about executive compensation as being a part of this, one of the drawbacks to that is perhaps that we would have fewer entities participate in what is essentially a voluntary act."
And House Minority Whip Eric Cantor, "outraged" over AIG's issuance of $165 million in bonuses, said he was not in favor of "the federal government be[ing] able to set salaries across the board," when the issue of executive compensation arose in September 2008. - Reply to this comment
The road ahead in Afghanistan, and the crucial decision Obama faces.
