• **FILE**In a Thursday, Dec. 11, 2008 file photo, Edward Liddy, chairman and chief executive officer of American International Group Inc., (AIG), speaks in Hong Kong. Liddy goes to Capitol Hill this morning, March 18, 2009, where he'll reluctantly defend millions of dollars' worth of bonuses doled out to employees despite the company's need for a $170 billion government bailout. (AP Photo/Kin Cheung, File)

  • Rodney Clark, from Standard and Poor's, left, listens as House Capital Markets, Insurance and Government Sponsored Enterprises subcommittee member Rep. Scott Garrett, R- N.J., talks to panelists on Capitol Hill in Washington, Wednesday, March 18, 2009, during a break in the subcommittee's hearing on AIG bonuses. Members of CodePink hold up signs behind them. (AP Photo/Susan Walsh)

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The chief executive officer of failed insurance conglomerate AIG acknowledged Wednesday that the company’s multimillion-dollar bonuses were “distasteful” to many and had provoked a firestorm of wrath.

“I share that anger,” Edward Liddy, chairman and CEO of the American International Group Inc., said in testimony prepared for Congress.

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, in his written remarks, said, “Mistakes were made at AIG on a scale few could have every imagined possible.”

But, he also said that the roughly $165 million in bonuses paid out over the weekend should be honored as a legal commitment of the United States government, which now owns 80 percent of the battered insurer.

“When you owe someone money, you pay that money back,” Liddy maintained. “We at AIG want to believe that we are all in this together,” said the man named six months ago to take over the company as part of the government rescue. Some $170 billion in tax money has now been pledged to AIG.

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 â a form of insurance â 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.

Liddy’s stance that the bonuses should be honored, no matter how distasteful, drew sharp comments from both parties.

It is “time for us to assert our ownership rights,” said Rep. Barney Frank, D-Mass., chairman of the full Financial Services committee. Frank said Congress will be asking for the names of the bonus recipients â and if AIG declines to provide it, he will convene the committee to 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.

The retention payments â ranging from $1,000 to nearly $6.5 million â were put together in early 2008, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company. Liddy himself is not getting a bonus and is only drawing $1 a year in salary.

Liddy also said in his prepared testimony that AIG grew into an internal hedge fund that became overexposed to market risks. AIG 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,” he said. But he also said that “we have to continue managing our business as a business â taking account of the cold realities of competition for customers, for revenues and for employees.”

The clamor over compensation overshadowed AIG’s weekend disclosure that it used more than $90 billion in federal aid to pay out to foreign and domestic banks, including some that had multibillion-dollar U.S. government bailouts of their own. AIG is the single largest recipient of government assistance â a company whose financial transactions were so intricate and intertwined that it was considered simply too big to fail.

Orice Williams, director of financial markets and community investment at the Government Accountability Office, the government’s top watchdog agency, told the panel that the government’s intervention helped AIG avoid failure, but that the company is still struggling to pay back the money.

Market and other conditions have prevented the insurer from making significant asset sales, she testified. She said most restructuring efforts are still under way.

Liddy said the company’s new management team found its overall structure “too complex, too unwieldy and too opaque for its component businesses to be well managed as one company.”

He said the new managers have “addressed our liquidity crisis and stabilized the company’s cash position” and is winding down the financial products side of the business.

The White House and Treasury Secretary Timothy Geithner, both of whom have condemned the bonus payments, have been pounded by questions about why they did not know about the bonus payments sooner.

The White House for the first time on Tuesday night said Geithner learned of the impending bonus payments a week ago Tuesday; he told the White House about them last Thursday, and senior aides informed President Barack Obama later that day.

Geithner said on Tuesday 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.

VIDEO: AIG HEARING

Archived comments

Edward Liddy is scum, the decisions of AIG have been blasphemous. You don’t pay someone who digs your grave and then shoots you dead. Please speak out to stop these bonuses !!!

getcraziesout

3/18/2009 11:46:27 AM

Sell your stocks, pull your money out of bailed-out banks and buy nothing from large national multi-national companies.

Your vote doesn’t count now, your dollar does.

This is nothing less that financial war against Americans. Use what you have to fight it.

motiff

3/18/2009 11:54:54 AM

No. Limbaugh is distasteful. AIG, is criminal.

TextualFavors

3/18/2009 11:56:17 AM

“arrogance, incompetence and greed,”

Are they talking about AIG or our government?

Dick_Tater

3/18/2009 12:06:04 PM

Motiff,

Has it occured to you that WE have provided billions of dollars to these companies? WE own a majority of these companies and if WE boycott them we will never get that money back.

Probably won’t get it back anyway, but you argument is basically to invest large sums of money into a company and then take active steps to make sure it fails. That makes absolutely no sense.

Dunkterfunk

3/18/2009 12:09:41 PM

Newsflash: Liddy came out of retirement to take over AIG at the government’s request AFTER it collapsed.The bonuses were already in place before he even got there.He earns $1 per year.

I can understand your anger but it’s misplaced.Please get your facts straight.It was Congress that guaranteed the bonus payments in the recent stimulus bill that was passed.Yes, Congress, the same group that just got an automatic pay raise this past January.

gsegiet@flash.net

3/18/2009 12:33:19 PM

I received an email from moveon.org with a petition protesting the AIG executives who are receiving bonuses. It made no mention of the fact that Congress made an exception for the bonuses. Do you think they could be persuaded to send out a petition to protest Congress? No? I didn’t think so.

catalpa

3/18/2009 12:55:36 PM

Righteous indignation from Congress?That’s hilarious.

backrange

3/18/2009 1:08:41 PM

these guys got caught. I bet that CitiBank, Wells Fargo, and Chase are up to no good too.

theIrishMan

3/18/2009 1:17:34 PM

Liddy’s lack of salary & bonus are not the problem; Liddy saying the gov’t cannot, and should not take back the bonus money is the problem! How can a multi-billion dollar company plead for financial bailout and still accept upto $6.5MM in “retention payments”! WTH are retention pymts anyhow?You want to retain the employment of the very people who helped run your company into the ground?Liddy said “we have to continue managing our business as a business”; if that were the case, you’d be terminating a whole lot of employment, NOT handing out bonuses for jobs well done.

ScorpioGoddess119

3/18/2009 1:32:32 PM

Barack Hussein Obama received a $101,332 bonus from American International Group in the form of political contributions according to

Opensecrets.org. The two biggest Congressional recipients of bonuses from the A.I.G. are – Senators Chris Dodd and Senator Barack Obama.

The A.I.G. Financial Products affiliate of A.I.G. gave out $136,928, the most of any AIG affiliate, in the 2008 cycle.I would note that

A.I.G.’s financial products division is the unit that wrote trillions of dollars’ worth of credit-default swaps and “misjudged” the risk.

rbonilla

3/18/2009 2:10:14 PM

The reason they are considered legal is because they are GUARANTEED bonuses! This means that they were part of the packages either originally written or rewritten when the gov’t put the bailout money in there, that GUARANTEES the bonus monies. In effect, they are considered INCOME. Using the word “bonus” is incorrect, even if that’s what they like to call it. So, doing a crappy job or a good job doesn’t matter as they are guaranteed to get the “bonus.”

And yes, most of these packages to these recipients were rewritten with the blessing of the gov’t. Heck, all it would have taken was a savvy HR person reviewing the darn agreements to point this out! Guess that step in the review process got overlooked, didn’t it?

And unless Barney can figure out a way to circumvent privacy laws, good luck on getting their names! And to what point? If the bonuses are (again) guaranteed, that’s income, not a bonus and Barney will be told by their attorneys to go piss up a rope.

The “retention” agreements (*cough…cough…guaranteed income) will hold up in court.

MountainHaven

3/18/2009 2:25:00 PM

BARNEY (ECONOMY IN) Rubble: It is “time for us to assert our ownership rights,” said Rep. Barney Frank, D-Mass.,

Just because its legal to own a gun, that does mean you can shoot anyone you choose with it…Franks is pandering to populist sentiment to deflect the spotlight from he and Chris Dodd…

SoldierInWarofIdeas

3/18/2009 2:28:50 PM

Scorpis Goddess: “WTH are retention pymts anyhow? You want to retain the employment of the very people who helped run your company into the ground? “

Its kind of like this….say you have a train that is headed down a track where a bridge is down….The Engineers should have known it, but for some reason they were asleep at the wheel (sending text messages, maybe??). They are the only ones who know how to stop the train in time to keep it from falling into the gorge…

Do you think it is a good idea for them to be fired and replaced by people who cannot be brought up to speed in time to prevent the train wreck?

SoldierInWarofIdeas

3/18/2009 2:33:49 PM

Catalpa….I used to live there…., or near there at least…

Now, how does a decent sounding fellow (or gal) like yourself get on the Move On list?

For that matter…how do I get on their list…I’d love to bust their chops…Do you suppose they have an open debate forum on their website?

SoldierInWarofIdeas

3/18/2009 2:42:11 PM

Is Obama also going to give back the $100,000 + campaign donation from AIG?

spud

3/18/2009 2:43:46 PM

Republican vipers sucking the US treasury dry.

“Free Market” Capitalism in all its glory.

TheBitterTruth

3/18/2009 3:07:16 PM

Tax the AIG contractual bonuses 100%…Yes, we can!

SoldierInWarofIdeas

3/18/2009 3:08:10 PM

All this clown needs is a shroud and staff and he’d make a perfect Grim Reaper.

meatpieandtatters

3/18/2009 3:11:28 PM

This is awesome. You do a cruddy job, but only you have the knowledge to do a good job. So, you need to be rewarded so that you’ll stay and *hopefully* do a good job and get us out of the cruddy job you created. Its like paying a guy who sabotages your computer network to fix it because only they can.

What a deal!

– Jon

jonutah@comcast.net

3/18/2009 4:01:40 PM

Here’s your bitter truth:

Senate Banking committee Chairman Christopher Dodd told CNN’s Dana Bash and Wolf Blitzer Wednesday that he was responsible for adding the bonus loophole into the stimulus package that permitted AIG and other companies that received bailout funds to pay bonuses.

BREAKING: I was responsible for bonus loophole, says Dodd

bouldermeister

3/18/2009 5:06:43 PM