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Outcry Over AIG May Pose Challenge to Obama’s Agenda

President Barack Obama issued a new defense Wednesday in the firestorm over AIG bonuses as the AIG chief testified on Capitol Hill. Analysts offer insight on the political impact.

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  • JIM LEHRER:

    President Obama issued a new defense today in the firestorm over the AIG bonuses, and the head of the insurance giant had his day before Congress. NewsHour correspondent Kwame Holman has our lead story report.

  • KWAME HOLMAN:

    The president weighed in before leaving for California. He acknowledged the anger over the bonuses, even as he pointed out it all started before he took office.

  • U.S. PRESIDENT BARACK OBAMA:

    Nobody here drafted those contracts. Nobody here was responsible for supervising AIG and allowing themselves to put the economy at risk by some of the outrageous behavior that they were engaged in.

    We are responsible, though. The buck stops with me. And my goal is to make sure that we never put ourselves in this kind of position again.

  • KWAME HOLMAN:

    Mr. Obama also argued again AIG was part of a broader, systemic problem, calling for new regulation and new attitudes.

  • BARACK OBAMA:

    People are rightly outraged about these particular bonuses, but just as outrageous is the culture that these bonuses are a symptom of that have existed for far too long, a situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bag.

    And one of the messages that I want to send is that, as we get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don't think that we can return to business as usual.

  • KWAME HOLMAN:

    The focus then shifted to the Capitol, where AIG's chief executive, Edward Liddy, was the star witness at a House hearing. He may have calmed some on the committee when he said he has heard the outrage.

  • EDWARD LIDDY, CEO, AIG:

    The payment of large bonuses to people in the very unit that caused so much of AIG's financial trouble does not sit well with the American taxpayer in any way, shape or form, and for good reason.

    Accordingly, this morning I've asked the employees of AIG Financial Products to step up and do the right thing. 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 forward and offered to give up 100 percent of their payments.

  • KWAME HOLMAN:

    At the same time, Liddy said, AIG was legally bound to pay $165 million in bonuses last weekend. And he said the company needs to keep vital employees, especially after accepting $170 billion in federal aid.

  • EDWARD LIDDY:

    Payments were made to employees in the Financial Products unit that caused many of AIG's problems, and Americans are asking, quite simply, why pay these people anything at all?

  • Here’s why:

    I'm trying desperately to prevent an uncontrolled collapse of that business. This is the only way to improve AIG's ability to pay taxpayers back quickly and completely and the only way to avoid a systemic shock to the economy that the U.S. government help was meant to relieve.

  • KWAME HOLMAN:

    In fact, the New York state attorney general has reported 52 of the more than 400 employees who got bonuses left the company anyway. They worked in a division that took huge losses linked to risky mortgages.

    Liddy was asked if those people truly deserved the money.

  • REP. MICHAEL CAPUANO, D-Mass.:

    Do you really believe that these are the only people that are capable of doing this job?

  • EDWARD LIDDY:

    No, I don't.

  • REP. MICHAEL CAPUANO:

    So that we could — there are other people out there that would have taken this job that maybe wouldn't have gotten this bonus. So you could have fired these people to replace them with equally capable professional people that are currently unemployed on Wall Street right this minute?

  • EDWARD LIDDY:

    If I — if you'll let me explain, each of these contracts is a complicated contract unto itself. It's not, "You've seen one, you've seem them all." They're really all unique.

    Had we done that, more than likely those people would have walked out the door tomorrow or whenever, and we would have had this $1.6 trillion book of business, which needs to be managed every day, with no one to manage it.

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