AIG Chairman and CEO Edward M. Liddy, who took over AIG last fall, says the payment of millions in bonuses was necessary to keep employees from fleeing its troubled financial products division bonus payments. Liddy himself is not getting a bonus.
Liddy told lawmakers he's heard the rage over the bonuses and has called on employees to voluntarily return at least half of the money. "This morning, I have asked the employees of AIG financial products to step up and do the right thing," Liddy said. "Specifically, I've asked those who received retention payments in excess of $100,000 or more to return at least half of those payments. Some have already stepped up and agreed to return 100 percent of those payments."
Listen to Liddy's opening statement to the House Finance Committee :
AIG is under scrutiny for more than $200 million in retention bonuses paid to employees in its troubled financial products division. The most recent payments of $165 million began to be paid last Friday and have raised furor among lawmakers.
These retention payments, which range from $1,000 to nearly $6.5 million, were not his idea. The deals were cut early last year, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company, reported the Associated Press.
"I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote to the current treasury secretary, Timothy Geithner, over the weekend, reported the AP.
Liddy will appear before a House Financial Services subcommittee. Lawmakers from both parties are casting his company as the symbol of excess and abuse of taxpayer dollars, with some calling for recovery of the funds. Many in Congress took to the floor Tuesday to rail against AIG.
"We will take this money back by taxing virtually all of it," Sen. Chuck Schumer, D-N.Y., said. "So let the recipients of these large and unseemly bonuses be warned: If you don't return it on your own, we'll do it for you."
Some Republicans targeted Geithner, saying he failed to ask the right questions when AIG sought its most recent installment of federal aid.
"Wouldn't the Treasury and the taxpayer have had more leverage over AIG's executive contracts before providing another $30 billion in tax money for them?" asked Senate minority leader Mitch McConnell, R-K.Y. "You know, once that money was handed over to AIG, the leverage was lost. That would have been the perfect time to make sure that this didn't happen."
For his part, Geithner said he was working with the Justice Department to find ways to recover some of the payments. A provision in the economic stimulus law gives him authority to review compensation to the most highly paid employees of companies that already have received federal assistance.
Nearly 80 members of the House of Representatives signed a letter to Geithner Tuesday urging him to "immediately intervene to suspend" the payments, echoing President Barack Obama's charge Monday that Geithner "pursue every single legal avenue to block these bonuses."
Liddy, meantime, published an editorial in Wednesday's Washington Post, writing: "The company's overall structure is too complex, too unwieldy and too opaque for its component businesses to be well managed as one entity. So the strategy we continue to pursue ... is to isolate the value in the company's component parts, capture that value to pay back money owed to the government, and allow AIG's healthy insurance companies to continue to prosper for the benefit of policyholders and taxpayers."
Overall, AIG has paid $220 million in retention awards to its financial products employees, reported the AP. It distributed $55 million in December and $165 million had to be paid by Friday. Documents provided by AIG to the Treasury Department said the awards ranged from $1,000 to nearly $6.5 million. Seven employees were to receive more than $3 million.
New York Attorney General Andrew Cuomo said AIG paid bonuses of $1 million or more to 73 employees, including 11 who no longer work there, last week.