Lawmakers Grill AIG CEO Liddy
ALEX COHEN, host:
And now, the other end of the income scale. Edward Liddy, the CEO of insurance giant of AIG, is on Capitol Hill today. He is facing a grilling there before the House Financial Services panel. Lawmakers are furious that millions of dollars in bonuses went to AIG employees after the company received billions of dollars in federal bailout money. The panel wants to know what AIG has done with those billions, and how much more money it may need. NPR's David Welna has been following this hearing, and he joins us now from Capitol Hill. So, everyone is angry about these bonuses. How does Edward Liddy justify them today?
DAVID WELNA: Well, he says that really, AIG had no choice but to pay these bonuses. Now Liddy, of course, was not there back in March of last year, when these contracts were drawn up for the bonuses, and yet he felt that he had to go through with them. Here's what he had to the panel today.
(Soundbite of Congressional Hearing)
EDWARD LIDDY (CEO, American International Group): Had I been CEO at the time, I would never have approved the retention contracts that were put in place over a year ago. It was distasteful to have to make these payments. What we concluded was that the risks of the company, and therefore the financial system and the economy, were unacceptably high, and if not paid, we ran the risk that what would have happened - what everyone has worked so hard thus far not to have happen.
WELNA: So he's really saying - that his top priority, really, is to repay the federal government the $180 billion so far that has been lent to AIG, and he says that there are $1.6 trillion still on their books that they're trying to clean up. This is down from $2.7 trillion last year. But specifically about the bonuses that the brouhaha has been about, he made an announcement at this hearing that he had sent a letter out to the 418 AIG employees who received the bonuses, and he asked that all of them repay at least 50 percent of those bonuses, and the top recipients of these bonuses - and there were 73 people who got more than a million dollars - that they repay 100 percent of those bonuses. He didn't say what kind of action would be taken if they don't, but this was clearly an attempt to head off efforts by Congress to go after that money.
COHEN: Right, and efforts by the New York attorney general, and perhaps efforts by the U.S. Attorney General Eric Holder. But the Obama administration has been saying all along that it really doesn't have the power to alter the payment of these bonuses.
WELNA: That's right. In fact, Treasury Secretary Timothy Geithner met last week with Liddy, and they discussed this, and it was quite a heated discussion. And the conclusion, really, was that to force AIG to abrogate these contracts could lead to much greater risks. It could lead to very expensive lawsuits. And the judgment was made that seeing the U.S. government almost oblige a company to abrogate its contracts could set a very bad precedent. Now, they at that point had not anticipated the firestorm of criticism that's ensued, and right now we do see even President Obama saying that money really should not be going to these people.
COHEN: Now, you say AIG has already received $170 billion, and yet it might need more. Really?
WELNA: That is expected, although it is not clear how much more it might need. Apparently its insurance operations, which are the core of the company, are actually doing well. In fact, its competitors say that it is underselling them with the help of the U.S. government bailout. But in terms of repaying the money, it's not clear that they're out of the woods yet, and there are those $1.6 trillion worth of risky assets that Liddy said could still blow up, and that's why they would need more money. But at this point, it's not clear whether members of Congress would be willing to give them that money. There's considerable angst about the bailout money in general, but in particular, about AIG, and there were warnings from the committee - insisting on paying these bonuses may have jeopardized any future approval by Congress of more bailout money.
COHEN: NPR's David Welna on Capitol Hill. He's following the hearing today, where AIG chair Edward Liddy is testifying before Congress. Thanks, David.
WELNA: You're welcome.