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AIG Chief Executive Admits 'Mistakes,' Touts Progress
He defended the Bush administration's decision last year to bail out AIG in the first place, arguing that allowing it to go bankrupt would have left numerous banks with huge losses and "would have threatened the entire financial system."
In New York, meanwhile, an AIG spokesman said the company is putting its Manhattan headquarters and a nearby office building up for sale as part of an effort to boost operations, the Associated Press reported. The potential sale was first reported by the New York Post. It comes at a time of depressed real estate prices in New York -- including for office buildings -- amid tight credit and financial industry downsizing.
In his prepared opening remarks given to the House subcommittee, Liddy said, "We are executing a methodical, orderly wind-down of AIG financial products, the business that caused many of the company's financial problems." He added, "We have reduced the notional value of AIG financial products' derivatives business from $2.7 trillion to $1.6 trillion."
Liddy acknowledged that AIG has received "generous" federal aid, and he conceded that "the patience of America's taxpayers is wearing thin." Because of a need to "continue managing our business as a business" and "certain legal obligations," he said, "AIG has recently made a set of compensation payments, some of which I find distasteful."
Liddy added that "we are all in this together" and that the company is working hard to execute a restructuring plan aimed at repaying AIG's debt to the government "to the maximum extent possible," continuing the company's main insurance business and protecting policyholders.
Before the AIG chief delivered his testimony, members of the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises took turns berating the company and federal regulators and demanding a return of the bonuses. Congress is considering using the tax code to recoup the money from executives who took the bonuses.
One bill offered in the House today would impose a 90 percent tax on such bonuses.
The subcommittee's chairman, Rep. Paul E. Kanjorski (D-Pa.), lamented at the start of the hearing that Geithner and Federal Reserve Chairman Ben S. Bernanke had declined invitations to participate today, but he said they would appear at a full committee hearing March 24.
"They have much to explain, not only to us but to the American people," he said. Kanjorski said AIG has "gained access to more than $182 billion in taxpayer assistance" under a federal bailout program approved last year. He did not elaborate on that figure.
Kanjorski said of the bonuses, "something is seriously out of whack, and AIG needs to fix it now." He said he had called Liddy in January to express concern about such payouts and had predicted that they "would rightly incite a public outcry." But he said his advice went unheeded. "The company hid behind legal technicalities, and the outcome I predicted happened," he said.
Rep. Scott Garrett (R-N.J.), the top Republican on the subcommittee, demanded to know where the outrage was "six months ago when the AIG bailout was hastily crafted."
Frank called the bonuses "wholly unjustified" and said it was time for the federal government to assert its "ownership rights" under the bailout to make major changes in the way the company operates. Because of the Treasury's assistance, the government now effectively owns about 80 percent of AIG. He attributed the bonus problem to the way AIG contracts are written.